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Both PS4 and 720 will have SKUs for under $500. Book it.
The 360 started at $299.99/$399.99.
The only reason the PS3 was $500-$600 was because of the Blu-Ray drive, unless Sony is shoe horning a mega expensive disc drive format into their next system again, PS4 won't cost that much.
But performance wise, sure a 6-7x leap over the PS3/360 is easy guys. An AMD 7850 GPU (28nm, small ideal for a console casing) obliterates the 360/PS3 and it's not a mega-expensive GPU either. You can pick one up from a store for $170, obviously the mass-produced price a company like Nintendo/Sony/MS could get that GPU for would be far less to boot.
The CPU/GPU IMO is actually not what makes these systems expensive. Even Iwata said with regards to the 3DS, the price of the chipset drops very quickly once mass production ramps up. What killed them on the 3DS was probably that 3D screen.
Nintendo would have to accept a system more akin in size to the Western NES though to make this work though. But honestly I never understood the obsession with super tiny consoles anyway. I never thought "gee my NES is taking up too much space". As long as the thing isn't the size of a boat, like the original PS3 was, it's fine (PS2 was an OK size too).
