I don't necessarily think that the price is too high, but it's definitely too high for MS.
The thing with price is that value is very much subjective, so anything theoretically could sell, just look at some phones.
To mainstream consumers XBox has so little value, that it's treated at the level of a PlayStation knock off.
This is anedoctal, but everyone I knew who had an XBox was:
a) Bought the console by their parents
b) Not particularly into gaming
To offset this XBox would need a long term marketing strategy to rehabilitate its look and try to entice people that would want to buy their systems. A costlier system flies in the face of that.
P.S. I'm astounded at how they manage to make an already ugly looking system look worse with each iteration
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