There is absolutely no comparison between the PS2 and PS3 launches. By the 25th week, the PS2 sold almost as many in Japan as the PS3 has world wide in the same amount of time. 

I don't believe that a 100$ price cut will do much for PS3. It's still gonna be at $500... Yeah it will move more systems, but how much more?

X360 on the other hand, think of it this way: Assume I'm looking for an affordable console:  PS2 is at 129. X360 is at 400. Difference = 270. PS2 it is!

If X360 drops to 300. PS2 is at 129, X360 is at 300. Difference = 170. Hmmm, not so sure anymore... I think this would make a world of difference...

That said, I think a price cut will not hurt the PS3 like I just said, because.... X360 has some good games coming out this year, and I don't see greedy MS cutting the price before next year. They will try to ride the wave as long as they can at this price point and with Halo 3 etc. coming they will be able to ride it a bit longer. 

People suddenly have this idea that $250 is a cheap, mass-market friendly price. Yeah right. Wii is EXPENSIVE. Yes, its a normal, traditional price for a console at launch. That's expensive. Nintendo are selling to the niche right now. $450 dollars for a console is ridiculous. Its a slap in the face that only a niche portion of a niche will pay. $250 dollars at least sells to an established niche fairly well. $100 is cheap-o, everyone-remotely-interested-will-buy-one-price. $150 of price cuts for PS3 is a waste of Sony's money which doesn't help PS3 at all, $150 of price cuts for 360 at least gets gamers picking it up at a fast rate, and $150 of Wii price cuts turns it into a mass market device, selling faster than anything we've ever seen before. Why not just throw out the universal assumptions of supply and demand? Sony were the ones who apparantly decided that the laws of supply and demand are bunk, when they designed and priced their console.

So Sony should wait until Microsoft or Nintendo lower their prices? Highly unlikely that there will be a price drop for the Elite so soon. By the way, who is to say that Microsoft will follow suit if Sony were to lower the price for the PS3? Microsoft lost a butt-load of cash on the Xbox, they were losing cash for each 360 sold, and even though they might be making a profit now for each new 360 sold, it's still nothing for them to boast their asses off. I wouldn't be surprised if they decide to play the "greedy" card.

All in all, I don't know who is going to throw the first punch and what will transpire after that, but there will be questions answered in due time.

Sony has said that they won't drop prices until they can at least break even on a sale of the PS3 console, without taking software sales into consideration

That is the way they should do it.

My point is that it would be a monumental mistake for a company that is losing money on a product (Sony) to attempt to get into a price war with two companies who not only offer a cheaper product, but also make money at their current price points (MS and Nintendo).

If MS and Nintendo want to play hardball in a price war, they have a lot more leeway to do so than does Sony. 

"If MS and Nintendo want to play hardball in a price war, they have a lot more leeway to do so than does Sony." I really doubt that there will be a dramatic price war...but prices will of course come down as the consoles get cheaper and cheaper to make.

While we may see Sony and MS do 100$ price drops I think Nintendo will do 50$ price drops to hold off that "OMG IMPULSE" 99$ pricetag for the end of this gen.

And I wouldnt expect them to pricedrop even if sony did right now, They are constantly selling out, why would they? These companies are about money and dont care about much else. They would stay at 249 and keep selling out, they wouldnt care. 

I don't think there's any danger whatsoever of Nintendo dropping the Wii price before 2008.