There's almost nothing Microsoft can do to salvage this generation. They can't compete on quality, they have no advantage in games (Sony's big exclusives are coming on strong), they can't compete on media (no built-in next-gen media), they can't compete on storage (you can pop a new hard drive into Sony's machine, no problem), they can't compete on fun and family-friendly (the Wii takes the cake). Their price advantage is chimerical - Sony is making so much money in EU markets, it could afford a $50 price cut without breaking a sweat.
I seriously have to question why Microsoft is in this industry. It may be time for Samsung or some up-and-coming Taiwanese company to get into the console biz, and provide some honest competition for Sony.







