Actually, I do think that Live is a problem.
For the majority, PSN has hit the area of "good enough" a while ago, and it's hard justifying $30-50 a year for something you basically get for free on the PS3. For those looking to play online, it's a mandatory added cost, which puts the 360's overall price way over the PS3's. I doubt many people care about the extra features of Live Gold, it's about as appealing as Blu-ray is to PS3 purchasers.
Of course, the PS3 is also the successor to the PS2. It's hard to tell how big a factor this is, but the bigger it is, the worse for Sony, really. In the future (next gen), they will no longer have this crutch.
Anyway, MS absolutely needs a price advantage, to balance the above out. It isn't impossible for MS to swing things back in their favor. A 360 redesign, large price cut, massive advertising with Natal along with a major game or two would do wonders. PS3 has rebranded itself and is pulling away with a ton of momentum, the 360 will need to follow suit.
I wouldn't count them out for putting up a fight in 2010.
