1) I still wouldn't consider the Wii and the PS3/360 to be in direct competition, any more than the DS competes with the PS3/360. The Wii is offering something totally different, and even if we end up with 150 million Wiis and say, 50 million PS3's out there, I can guarantee that Sony would rather have that than to have 50 million 360's vs 30 million PS3's, since they're directly comparable.
2) As for people not trusting the Microsoft brand as a reliable purchase, it's not like it's ever been an issue before, except for mice (I'll admit, they do make good mice). If reliability were a factor, everyone would be using OS/2. And another thing... It's also unprecedented for Microsoft to ever succeed at anything they can't leverage the Windows (really, MS-DOS) monopoly they inherited from IBM into (although they're trying with XNA). Just look at... Money vs Quicken, Zune vs. iPod, WinCE vs. Symbian, AIM vs. MSN Messenger, the list goes on. Really, the only successful product lines they have are Windows and Office. They have a tradition of seeing someone making money in some market, then deciding they want a piece, and having it blow up in their faces. Also, in all those examples, everyone thought they would just use their (seemingly) infinite wealth to just hammer away at the competition until they ended up successful, and just either languished in miniscule marketshare or just abruptly dropped the whole market. Also, most of those failures were also software, which is their actual experience. They're really going way off in left field in terms of their experience with trying to run a hardware-based game division.
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