The best MS could do anytime soon is release a completely redesigned 360 - possibly with a Wiimote type controller.
The key element here, is that it *must* have the same technical specs as the existing 360 - can't have new software developed which doesn't work on existing units.
They could add a new Wiimote type controller, half the size of the console, consolidate the chips - and drop the price to $199 (or lower), and just make it look tight, small and sexy.
The 360 is just starting to build nicely, and take off. There is no "power" advantage for the PS3 - so increased specs wouldn't help MS sell more units. A lower price point however would help.
...
Its going to be really fascinating to see how all console makers respond this generation, and to see what they come up with next. You also have to wonder if Apple, Google or someone else will consider jumping in with a "low-price" solution. It wouldn't surprise me.
Gesta Non Verba
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