On one hand Microsoft has clearly positioned themselves in a better place than last generation. That said, here are few things they could do to regain momentum-
release a new slimmed down hardware design within the next year with an error message that isn't visible on the front of the machine (even if the failure rate is high at least they'll be done with the rrod and can say they it's gone from the new model).
introduce this new model with a price drop to $200-250 and in the form of bundles with one year of free x-box live and/or a free game in the box (maybe the next Madden or Gears 2 in the states, Fifa or some racing game in Others)
things they shouldn't do- release a wii type controller to counter Nintendo (bad mistake in my opinion, I predict trying to change their marketing to the Wii's demo will fail miserably on both a hardware and software sales level and may push some potential buyers toward Sony.)
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