What does MS need to do to pull out a significant lead over PS3 in na.  PS3 will be releasing GT5:P(though this will be minor in NA) and MGS4 so what does MS plan to counter this with especially since PS3 has taken the lead over 360?  I leave GTA4 out since both receive a boost and HW the PS3 might benefit more since it has a smaller install base.  So a price cut a new IP? What MS will release?

They have about 7 million more consoles sold in NA, id say they already have the signifigant lead. Its more like what should sony do, which is a 100 dollar price cut. I think sales would sky rocket but thats my opinion.

I dont think they can do anything but have more and secure more established titles(for example if they got an exclusive FF or MGS). Playstation is selling primarily on brand name recognition at this point. XBOX's 3rd outing will turn out better than this one and they may be equals with PS4 that time around (not in Japan).

price drop, Price Drop, PRICE DROP!

And hope that Gears 2 or Ninja Gaiden 2 really push sales. But they don't have to do much, they're still in the lead...

Now is the time for maintenance. So a moderate price drop, and some good games would hold off the PS3 for some time to come. I mean, the Wii winning NA is inevitable, but if focusing on keeping the lead on the PS3, some good exclusives, and a moderate price drop should hold Sony's Platform off for a time to come, but Sony will be more apt to drop the price more, since PSP and [amazingly] PS2 are still selling, and both make money for every system sold, let alone software, so they've got some room to drop prices, and break even, take a loss for a quarter or two.

There's not much they can do, 2007 was the high point of 360 games... 2008 is looking okay, but not as stellar as last year...

Where as the PS3 and wii are looking much better this year...

MS needs to make money and ride out the generation. Doing that, they should end up with at least 30m consoles sold, probably more in the 35m range. They should also come close to breaking even on the console overall and it will give them a good foothold going into 2010 with a new console.

Which is why 2008's sales are way higher than 2007.

IMO Microsoft is doing exactly what they need to do to get ahead.  They're focusing on acquiring IPs (exclusive and otherwise) and exclusive content.

In other words, they're focusing on getting more/better games which is adding value to the 360. 

they need a halo 4

I think if MS drops price in NA by $50, continues massaging its great IPs now and be aggressive in securing new IPs for the next generation of games, it will continue to grow YOY. Also, I think they need to lower the Live subscription costs and do more and better marketing outside the US.