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You see, Hardware manufacturers also have to think about current projects, the amount of support, etc. when trying to decide when new product should launch. Now Microsoft moreso than Sony or Nintendo have shown that they will do what they want when they want. I think that they would still give the life of Xbox another year or 2 before entering the market with another console.

I think you make very good points about this seeming like an intermediate step since 720p or 1080i are just stepping stones to 1080p, but the adoption rate of HD is not as great as was hoped. This will warrant the existence of this generation. I do think that Nintendo will jump to at least 720p next gen along with whatever crazy things they have up their sleeves. There is also an unpredictable factor: 3D holographic projection. Will this technology catch on in time for the end of this generation or will it be pushed back another 5 yrs?

Lots of questions this generation in sales, placement, target audiences, technology, etc. We won't know till it happens.