The options are numerous.
The easiest by all accounts would be to outfit the Arcade with a 60GB HDD and suddenly, the $299 elite is quite redundant in it's price to functionality advantages.
Price drops as you've suggested are logical.
But I say, nothing needs doing. Break it down by region
Japan - Always a dead loss, nothing can be done, so don't bother.
USA/UK - Basically the English speaking ones, PS3's high UK price is still undercut by all other consoles and SKUS and frankly, I doubt the USA's love for Uncharted and Ratchet outweighs Halo and GTA any more then it did in 2007.
Everywhere else - Difficult to gauge, but then the PS3 is still priced higher in Euros then the other systems, give it to the PS3.
So PS3 probably gets a bit of leverage behind it until MS reacts, which could be tomorrow, or next year. I bet the latter.
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