I think some people got it all backwards here. Microsoft is not looking to make Live free to compete with PSN, regardless of your beliefs on how equal you think those systems are. On the contrary, I am SURE Sony is looking into ways they can monetize the PSN to attempt to get the revenue streams Live provides Microsoft. That isn't my 360 preference talking there (I have always admitted to preferring my 360 to my PS3), that is my business sense talking.
On topic:
1) Avoid hardware issues like the plague
2) Live integration for a seamless transfer of online identities from the 360
3) Backwards compatibility.
4) Promised updates of the heavy hitters - Halo, Gears, Forza, Fable.
5) New IP's
Given their current place in the European/American markets, they do these things, I think they'll do fine.
Now for Japan....well that would need a totally different strategy.
