I don't think the issue is so much specs > pricing as the fact that Microsoft sells accessories for the 360 at outrageous prices so in the end buying the higher end models is a better deal if you feel you're going to have to upgrade HDD or get WiFi for example.........
Arcade is a good deal if you're never going to go online much or download anything. Otherwise it sadly is a rip off....
MikeB probably hits it in the head too with his post.
360 has had quality issues and most people probably believe they are less likely to suffer those if they buy a more expensive model.( wether that is true or not, I can't comment..)








