Larger installed base a disadvantage for game sales..?

[Reasonable]

I think you're thinking of how attach rate is artificially high early if you have some big selling titles, such as Halo3 on 360 or Halo on Xbox, while over time the attach rate goes down.

However, a large install base should result in more SW sales overall provided a broad enough range of genres is offered, unless the console has a more narrowly defined demographic install base.