Even if they did all of that, MS still wouldn't be able to compete with the Wii.
Don't get me wrong, I love my 360, and it's been getting more playtime than my Wii lately, but it's got no chance of winning.
"'Casual games' are something the 'Game Industry' invented to explain away the Wii success instead of actually listening or looking at what Nintendo did. There is no 'casual strategy' from Nintendo. 'Accessible strategy', yes, but ‘casual gamers’ is just the 'Game Industry''s polite way of saying what they feel: 'retarded gamers'."
-Sean Malstrom