You can rest assured that the next MS console with been significantly more powerful than the PS3. Even at a $399 price tag they could make it way more powerful than the PS3 if they launch a year or 2 from now and that's a price point people would have little problems with, and because Xbox's are designed very much like PCs they aren't hard to develope for. Nintendo on the other hand would probably settle for something around $299 and be only slightly more powerful than the PS3.

I disagree that the PS4 won't have a large graphical leap over the PS3. Simply put, every generation, people say that the leap won't be as big as the last but there ends up being a large difference.

The issue is that people look to AAA first party exclusives as the graphics norm for the current gen, it's the third party games you should look to in terms of how further they can go. I played the Mafia 2 demo on PS3 for example and it was terrible, not the gameplay but the visuals.. The game chugged and screen tearing was prominent. Also look at some of the open world games like Prototype, not a whole lot of detail in the game world, buildings look like models with flat textures pasted on top and many titles still aren't 1080p. Next gen will hopefully fix some of these things. 

As for whether Sony have screwed themselves, I don't think so. 

Sony put a huge cost into the PS3, but everything the PS3 is now scales very well.  The CPU scales well, add more SPUs and PPEs and you have a beast of a processor for far less cost than what the original chip cost to manufacture.  Ram is ram it's always scalable.  Blu ray is also scalable, I remember when bluray first came out they had a 37 layer disc in the labs, so even a tripple or quad layer disc will be more than enough for next gen for space.  GPUs are always changing because of the PC space, they don't have to R & D much on that end.  Everything in the PS3 you can just add more for a smaller cost than what it was to R & D the PS3 and it will be a beast of a machine.  I don't see the PS3 costing more than 400 dollars at launch and I don't see it costing much more than that to manufacture.  Plus Sony has been slowly building all these tools, slowly utilizing the CPU and GPU once they better automate code being spread over the CPU's cores its going to be amazing.  The only thing that'll really screw them over is if they change CPU architecture, it'll completely waste all the R & D they've been doing on the PS3.

They don't need a PS4, the PS3 is 'futureproof' and will last forever.

Or they could just duct-tape two together with a move controller and win the generation.

Seriously though, no they havn't screwed themselves (other than with the losses PS3 caused), but I expect a different approach with the PS4, much like how Nintendo took a different approach with Wii (as oppose to GC), or at least move closer to Nintendo's business model (selling hardware at a profit, not a loss)

If they want to release a somewhat affordable system anytime soon there is no way it have much more power than PS3. Sony did an awesome job to reduce their PS3s manufacturing cost over the years. At the moment, if another company was to produce a similar console in terms of hardware they probably would have to sell it at around 400$-450$ to break even. Either they wait at least 4-5 years before releasing a system, they release a much more expensive system or PS3 will still be at a somewhat similar performance.

As long as  SONY sticks with Blu-ray and Cell technology, they will be in the BEST position for their next console for the foreseeable future.  As long as Blu-ray and Cell technology are still viable (and both technology were designes to do so), I can see SONY falling back on these technologies because it will become cheaper and easier to produce while developers will already be more familiar with the technology.  Also, third party support remains as strong as ever on a SONY console given after everything the PS3 has been through while SONY themselves are really pushing their 1st and 2nd party efforts.  What's really going to happen I dunno.  But for SONY to be more competitive than ever for their next console is within reasonable probability.

Sony has basically assured that the blu-ray will be used for the next XBOX, giving them royalties for every disc made,  the next wii might be using blu too.

Sony probably won't come in for the next gen overpriced...

etc.  

so, in some ways they have an advantage.  The only disadvantage is the powerful support that the PS2 had for the PS3..... and the PS3 won't have the same level of support for the PS4 but it does have other things like how Sony won't have the need to put out some overpriced console and that they will be getting royalties from the discs.

@Carl2291. agree with a lot of what you've said. its just imo, why even think about releasing a PS4 for at least another 4 or 5 years. i mean the PS3 has only just started making money, and it hasnt reached the type of saturation of the PS2 (not even close).

my point is that i think the PS3 is fine to compete with next xbox or wii. i think the console will be more than enough to go toe to toe with them, and it will likely have the advtange of price. but whether or not people percieve it as last gen is a problem!!

the only thing i would add to what you've said is that when PS4 does come out, i think they should release an SKU with no HDD, that way PS3 users can save some money buy reusing their old one, and this will also reduce production costs. of course they should also release a SKUs with HDDs.

PS. and most importantly is making sure that they are the lead platform for development with 3rd parties. and i imagine 3D will also be a very powerful weapon next gen!!

Nintendo won't pay royalties. That is why none of theirs system have played CDs or DVDs as far as music/video contento go.

They will have a disc that is similar in storage, but it probably won't be a Bluray disc.

Someone likes to overanalyze what we can not really know. Just a fantasy in your mind bro.