I can see a few issues with a price cut of such large magnitude.

1) Existing users ragin': Thankfully Nintendo has offered them a lot of free games as an apology, so this point isn't really valid in this situation

2) Product is seen as "cheap": If you weren't "in the know", wouldn't you be asking yourself why Nintendo dropped the price so rapidly? It could make people see the 3DS as a flawed piece of hardware.

3) Not much room to drop it futher: Each price cut boosts sales, so wouldn't you want lots of smaller price cuts to boost sales regularly? 

4) Similar price to DSi: If they're trying to make the console seem different from the DSi on the shelf, they're hardly helping their cause by making the prices almost the same. 

Am I mad, or are these valid concerns?

1) As you say, not a problem

2) It could happen, but this is a marketing problem. The new ads in the UK underline its being "new generation" and the new features. We could also say the same happened to the DS, but it was never saw as a flawed hardware.

3) A redesign could be in the works, and with that launching in 2012-2013 they're sure a new price cut won't be needed until years.

4) Similar price to the XL actually. That's a valid point, I think this will be corrected later, seeing how the sales of the two console change after this cut.

The PS3 and original xbox dropped their prices way more in the beginning and they benefited greatly from it. People saw the 3DS as being to expensive for a handheld console so the price cut will most likely lead to the new price being viewed as reasonable rather than cheap. Also I would be surprised if they actually wanted another price drop in the future given the likely sales increase with lower price and high profile releases incoming.

desperate times etc

3) Not much room to drop it futher: Each price cut boosts sales, so wouldn't you want lots of smaller price cuts to boost sales regularly?

If this is true Nintendo should do a price cut every moment of the day. Infinite sales!

I somehow agree with you on point 3, a pricecut would have been better when Vita launches, now the effect of the pricecut will have worn off at Vita's launch. And when Vita sells well, there isn't much they can still do. (other than release tons of games of course). They should just have cutted the price by 5000 yen first, and if it doesn't bring the wished effect, they could have still cutted the price again.
Correct me if I'm wrong here.

This is a bold move by Nintendo, considering how stingy they have been in the past with regards to hardware *and* software. If there's one thing I've learned about the company, it's that once they decide they actually want to do something, there's no stopping them. That's why they are characterized by so many opposing extremes, IMO.

You can be sure 3DS sales will explode after this takes effect. There will be those who perceive it as a devaluation of the product or brand, but the average Nintendo customer (ie: mommies buying one for their kids) will jump at the opportunity. Either way in about six months time the 3DS will already have a pretty good library of games, so its value is safe in the long run.
Furthermore this is bound to bring in lots more 3rd party support since it is a HUGE show of confidence from Nintendo in the console's potential to have a vast user-base.

I am honestly surprised by this move. I didn't think the 3DS was doing too badly, TBH, but maybe comparing it to the DS is unwise since the competition is much more fierce these days.

Either way this (+the 20 free games for existing users) is a move that will shake up the industry and I applaud Nintendo for continuing to be unpredictable and unexpected!

Yeah. They should drop by $1 per week!

2) Product is seen as "cheap": If you weren't "in the know", wouldn't you be asking yourself why Nintendo dropped the price so rapidly? It could make people see the 3DS as a flawed piece of hardware.

Considering the current economic situation, not really. It went from too expensive to somewhat reasonably priced. Still needs the right games though. As for your other points, they're not that important for how much it will sell.

Hot damn a free 3DS in 250 weeks!!  That's like almost 4 years? Almost in time for the next 3DS so sounds good to me =D