Whats first? $199 Xbox 360 Pro or a $299 PS3

[Soundwave]

Will happen at the same time.

If Sony cuts their price/releases a slim MS will counter by just shoving a 40-60GB HDD into the Arcade, thus making it the new base package.

A 40-60GB HDD probably costs MS like $10-$15 at cost if that. That's a lot easier to take than another $50-$100 pure price cut.