Sony would have destroyed the 360 had they not overengineered the console anyway. Bluray was a big hit on the device in pricing terms and it delayed the launch, only now 3 years later are there any benefits being shown for it. The Cell was fine but they should have realised they needed a GPU earlier in the design phase and secured a better one than the weaker Nvidia one they got.
In summary, they could have dropped Bluray so they released earlier, they should have gone for a better GPU too. A PS3 released at a cheaper price point with free PSN and more comparable games (thanks to the GPU improvement) would have murdered a 360 swamped in the controversy of RROD. If they kept the HDD as standard in every console then installs would have made disk swapping unecessary too.
The OP's suggestion would have fared well for 2 years then developers would have jumped ship and forced Sony's hand anyway. Its a good job Microsoft cocked up the 360 hardware with RROD or the PS3 would probably have been stillborn though.
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