I don't think the X360 is in trouble as much as it is that Sony actually has a PS3 that is selling.
Xbox 360 sales week-over-week are up nearly 50% from the same week last year. That's a huge improvement for the X360. Not only this, talk is about a price drop when GTAIV launches - which would definately help the system.
Ultimately, the X360 is doing quite a bit better than the Xbox did. No one expected the X360 to win vs. the Playstation 3, and the fact that it's taken more than a year, and desperate moves by Sony to get them to barely equalize, is a huge testament to how much better the X360 is moving vs. the Xbox.
Could Microsoft do alot more? Absolutely. MS needs a price drop, strong software agreements in Europe and Japan to spur sales, and better advertising abroad.
However, with as much as people think that MS layed all of their cards on the table in holiday 07 - I think, if anything, what they did just set them up for 08 being an even more critical - and winnable year.
If MS doesn't botch up the GTAIV launch, and promotes the title as an X360 title, with a price drop too, Sony will be backed into the same corner it did in mid-07, while the X360 will be precieved as the go-to console by core gamers in the US (ie, PS2 owners, the 40m of em), and a strong showing in Europe.
Back from the dead, I'm afraid.
