I Think Sony should remove the built in Wi- fi And the game from the bundel and lower their Price Tag.

What are some other solutions?

Keep the price and bundle in a classic PS3 game either Motor Storm, RFOM or Heavenly Sword. Offer more value to the customer.

Maintain price and include DS3 controller with every new PS3.

Switch to a wired controller instead of Bluetooth.
Make the drive tray-loading or pop-up(like the PS2 slim) instead of slot.
Switch to regular buttons instead of those fancy schmancy touch sensity marks.
Switch to a basic matte-plastic case instead of glossy.
Take the power supply out, and use a brick like the 360.
Two USB ports.
No optical out (not very realistic).

The solution I see is: Lose more money on the PS3 itself by lowering its price to 300$ and earn more money on the PSN and games and accessories.

It seems that's what MS is doing. Come with a gimped system that seems cheap, but make money off "peripherals" and other optional things (live) that are in actuality necessary.

So, the console seems cheaper, when it's really not, and you get people to commit.

If you look at my list there are a bunch of things Sony could have done/could do to cut costs without hurting the functionality. (Except bolded)  That bluetooth controller is a big cost and should be bumped out of the cheaper version, not many people will care.

Edit: With my cost cutting the PS3 would still have WiFi, Bluray, and batteries built into the extra controllers people can buy; it would still be much more functional than the 360.

For PS3 to blow past Xbox 360

$399 should = PS3 + 2 dual shock 3's + 60GB HD + choice of Pain / PixelJunk Monsters / Stardust via free download + wifi

lose the memory card reader and advertise with HOME + Pain/Monsters/Stardust for FREE

$499 version = everything above + game of the moment (MGS4/Gran Toursimo 5/Madden 09/Resistance 2/Motorstorm 2) w/160GB hard drive

I'm not sure, but would having a pop-up tray just be asking for problems with the blu-ray laser? I think that was a problem with my PS2 having disc read errors. Cleaning the laser off helped though usually. Also, my receiver doesn't have HDMI, so I use the optical out for surround sound. And I also use all the usb ports; Guitar Hero dongle, at least 1 charging usb cable, and a flash drive.

I agree with the others though.

Wasn't the pop-up tray in the slim.........when the DRE problems were virtually non-existant........or am I badly screwing up my PS2 hardware history?

DS3 controller + a new game + a BR movie

EDIT: If MS gets a big boost from price cuts, cut the $399 price tag to $349. I think they can afford it.