If PS3 surpasses XB360 and gains a margin wide enough, sooner or later it will surpass it SW wise too.
If they get close and close remain in HW sales, XB360 will keep its initial margin in SW as absolute value, but this margin will become less and less significant relative to total SW titles and sales as this values grow.
XB360 totally wasted its time advantage, Wii caught up incredibly easily, but also PS3 is slowing catching up and with a life cycle of 7 years or more there's not much hurry.

It depends on who gets to determine when the generation ends and who's definition of generation you use. Each side will define the "generation" in a way that makes them come out the winner. :)

Oh damn. You were way vague. I would change the first post to reflect that you mean the features, not software. We equate software with games when we speak on videogames.

I do think Sony can catch Microsoft one day. They've been trying really hard lately to get a comparable service running. I haven't heard of any updates that Microsoft is working on. I bet e3 will reveal a lot though, so stay tuned.

They will eventually sony are old hands at this game.

I would suspect that the PSN will about equal to XBL and perhaps slightly better by then end of the generation. That is, if Sony continues their maniac FW update pace. If they don't then probably XBL because M$ has waaay more experience with software. (though they did write Windows Vista didn't they.... hmmm...)