I could be wrong, but I have always assumed that Nintendo included Wii Sports and priced the Wii at $250 outside of Japan because they were anticipating a price cut from Microsoft.
Wii Sports has easily had all development costs paid for (from sales in Japan) and the only remaining cost is what is associated with printing the disc; at the same time we know that Nintendo can afford to sell the Wii for $200 in Japan. This leads me to believe that if Microsoft reduces the price of the XBox 360 into a competative range with the Wii you'd see Nintendo price the Wii worldwide at $200 including Wii Sports.
Personally, I think Microsoft should drop the core model rather than reduce its price to $200 ... I think most people who are interested in the XBox 360 want the hard-drive and wireless controller so there really is no savings on the core model.
