To answer the thread title: "Is this year, they year of PS3 domination?"
Well, the answer is a resounding no. Depending how you define "domination", the PS3 will never "dominate" the industry.
If you are talking about the 360 vrs PS3 - I think people have this all wrong.
I see Sony's lineup this year actually starting to look a little weak - relative to the other consoles anyway. I guess it depends what games you are into, but much of this is due to Killzone shifting to '09.
MS will easily win the US this year - easily. There will be no PS3 price cuts, there will be 360 price cuts, new models, and so on. If the new 360 controller works really well, it could have a great year.
The question in Japan is whether MGS will create a sustained boost to PS3 sales - the answer is definitely NO. MGS is not a type of game the Japanese love (shooter), and the majority of MGS fans are the ones who already own the console. So it *may* sell 1m units in software, but its unlikely to give any sustained hardware boost. Find out soon.
This leaves Europe. MS is definitely struggling there, but the big question is how the GTA exclusive content goes down - and it should go down pretty well. I think by the end of the year, MS will "narrow" its weekly sales loss to the PS3 - but its hard to know by how much.
Sony can expect to build a 50k/week (average) gap on the 360, which comes to about 2-3m units this year. This seems about right, and is also what most people are predicting.