I'm in the 'dominant console' camp, having a dominant console allows more experimental and risky games to flourish, and improves the quality of games. When the market is evenly split, developers either waste resources supporting multiple consoles to improve their potential market size, or reduce risk by sticking to the tried and true genre's and gaming tropes.
Regarding arrogance of the console maker due to market domination, no matter what a console maker does time and technology keep marching on, which eventually leads to a new console generation, and each generation forms a reset switch that puts the console makers on a level playing field again. Last gen was a classic example, PS2 was dominant, Sony got arrogant, made some dumb decisions with the PS3, lost huge marketshare to the 360. Customer loyalty only takes console makers so far, and the more missteps a console maker makes, the less loyalty that remains.
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