Quite honestly, I don't see this being a good thing for Nintendo? I doubt they would ever do it. Competition in a marketplace is healthy for companies, if there was only one console then I think the market would drop in size rather than grow.
Aye I agree. No company in their right mind would want to work for Sony right now. I worked for them for about 1 year in the entertainment department (SCEA) and let me tell you they are in shambles all the way up the food chain. There are a lot of underqualified (really stupid) people in high ranks right now which probably explains why the PS3 is in the current shape it is in. A lot of heads need to roll and Sony needs to look internally at its management before anything can be fixed. Unless a company is extremely desperate, teaming up with Sony right now (gaming division at least) would be a horrible idea. Maybe if they cleaned up their workplace a bit first...
If Sony had half a brain, I think they should just bite the bullet and do the price cut. Yes they lose money but at least they retain customers for the next generation and if they can win back 3rd parties they can still make a healthy profit. A $100 price cut only means they need to sell 3-4 more games per system. That shouldnt be too hard if they can sell enough systems and regain 3rd party confidence. The alternative is keep the price the same, lose customers and 3rd parties and allow Nintendo and MS to take over the market which will cost them even more next generation. I think you need to look at the long term.