The success of the slim design, recent profits, greater access to developers, etc all point in the PS3's favor.  Does this mean that things are past a tipping point, where Sony can no end the race in third place?   Or, will MS's natal project wreck all of this and send the PS3 back to the mediocrity that it has known for until lately?        

We won't definitively know until natal and arc come out... and even then, there will still be some time for a killer-app to surface.
Alternatively, if the Natal flops, assuming armchair theorists being right about MS' console release strategy, MS could just announce a new console and restart the war from day one.

Coming back to what exactly?

The ps3 will still be in third place by gens end but the ps3 wont go back into mediocrity (that was back in 06-07)......sony has just started to make profits on the machine and youve got to think that this is their number one priority right now.

Sales doesn't define how good a console was, only how popular it is. Saying it's "mediocre" is well...just wrong me thinks.

it's a welcome boost to the product but it may just be that, a boost.

I know it's so gonna drop the second week the after slim's launch this wont last...................................oh wait

well what i feel basically is quality-demand tops price-demand and this holds true always. It was never mediocre other than bearing a heavy price-tag that did hurt some bit. So there is no looking back for the console now, it needs to make further leaps on the road ahead this gen combined with the motion sensing device wand.

I laughed so hard at that, I woke up my neighbors.