I think if it would have sold 400 dollars with kinect, it would have had the upper hand against sony despite it being weaker. Because more casual people that wanted say next gen call of duty would possibly think the extra value of kinect would opt for X1. But at 500 dollars I see it being a stickler and launching like PS3 did.
Now should they have done it? I don't know, that's not how microsoft generally operates and if we're comparing company business models, Microsoft is way ahead of sony in that department as far as profitability is concerned. I'm sure people at MS would be under even more pressure for it to perform extraordinary if it was being sold at a loss.
But, I don't think pricing it the way they it is now was the correct decision, as I just think it's going to flail around.
