The argument "The 40GB PS3 is cheaper than the XBox 360 Elite" is a foolish argument because they are (really) not alike at all; the 40GB PS3 is going to be seen as the "Gimped" PS3 because of its lack of backwards compatibility and will likely share a similar market segment with the XBox 360 Core/Arcade. I could be wrong but I believe that most people see the XBox 360 offerings as Core/Arcade = "Gimped" XBox 360, Premium XBox 360 = "Real" XBox 360, and Elite XBox 360 = "Pointless/Overpriced" XBox 360.
Whether or not people believe it, backwards compatibility is a huge selling feature and is (amazingly) useful at getting people to "upgrade" to your next system; if someone needs to keep a PS2 under their TV regardless of whether they buy a XBox 360, PS3 or Wii they're far more likely to choose the XBox 360 or Wii than they would be if the "Affordable" PS3 had backwards compability.
