I think the reason for poor Arcade sale is also due to a lot of misinformation by store clerks. I have been at Best Buy so many times and overheard the salepersons telling customers that 360 Arcade can not play a lot of 360 games. I often heard something like oh if you want to play Halo3 you are going to need Premium / Pro.
Personally I think Arcade is a nice 2nd console for person that said already have PS3 or Wii and only interest in a few of the 360 Exclusive games. It also for gamers that are not looking to heavily spend time on Live and such. While we might think that it is dumb for people that buy Arcade sku but that's $80.00 they don't need to spend for Premium/core for features they won't used. There are still people that buy system just so they can play Madden or Halo3.
Not everyone lifestyle is like your or mine.
