I think people were expecting way too much from this price reduction ...
Certainly it was a large value for a price reduction ($100) but the console is still $500 which means that when you pick up the system, a game and pay taxes your total will always be over $500; there has been a lot of research into the psychology of certain prices (and I'm no expert) and I expect that paying more than $500 for a toy is a non-starter for many individuals and families.
Beyond that, even the core gamer early adopter crowd unless they are also in the market for a Blu-Ray player; most of the games available for the PS3 are available (and have been available for awhile) for the PC and XBox 360; for someone who has no interest in Blu-Ray it doesn't make sense to spend $500 on a PS3 when you could buy FEAR, Oblivion, and so on for a platform you already own for $60.
This outcome was obvious being that the 60GB PS3 has been $500 in Japan for quite a while and has not sold particularly well ... The question is whether Sony will be willing to perform the drastic actions that are necessary in order to make the PS3 competative before it becomes too late?