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IF it did happen I reckon it would go something like this:

I think with the new 80gb and 160gb bundle, they are cheaper to make. No BC on offer in the US models now. Also rumoured that these models run less watts implying 65nm GPU - another saving in cost.

So with the 160gb currently bundled and 499.00US, they can drop the bundle and not piss off (too much) previous buyers of the 160gb if they drop the price to say 399.00US. And let's face it, at the OEM level there is bugger all difference in costing of a 80gb hdd and a 160gb hdd.

Then drop the 80gb model to 349.00US OR if they really wanted to go for it, drop it to 299.00 to take the 360 Pro head on.

They can sit back and see. If there is a huge upswing in 360 sales, I guess Sony will be forced into action but why take action now? Best to wait and see for a month.