Would Sony be fine with a $499 price tag on the Orbis?

[Gehirnkrampf]

One thing to add to this discussion is inflation.
Those 600€ back in 2005 (i'm taking 2005 because we're discussing now about one year before the next console will release) are the same as today 670€.

so if you talk about releasing a new console asking for a pricetag of 400€, this is the same as 355€ back in 2005.

So what you are demanding is releasing a console for about HALF the pricetag than done with PS3. You may get cheap hardware, which won't be able to compete for very long.