I have an issue with your post, It could be interprated several ways. Please clarify.
Well a 360 with no DVD drive and big HDD = a PSP Go that has DD only and an amped up HDD. The "next gen" 360 wouldn't sell much, since its new territory (DD only). Just like the PSP Go is unexplored territory and people like UMD. Got to remember that Sony also have went public saying that they're also targeting the iPhone and iPod touch. With price (just below a 16gb ipod touch), "mini games" (apps), portability, Digital Distribution (app store) etc.
So.. as for PS2 did it better. This gen is a flop for PS3/360 since both have updated online features, community, HD, blu ray, movie stream/stores.. etc. While the much more simple PS2 sold alot better. Wii is doing good however.. kudos.