I think Microsoft has a choice to make.
Option 1:
Earlier, larger price cuts leading to a larger userbase and better stead for next generation but just missing lifetime profit on the Xbox 360.
Option 2:
Later, smaller price cuts leading to a smaller userbase and a more difficult next generation, but making the Xbox 360 profitable over the course of its lifetime.
starcraft - Playing Games = FUN, Talking about Games = SERIOUS