To turn this thread into a positive, lets look at logical idea's to turn the playstation 3 around, without having to spend a ton of money, or drop the price. Lets not aim for number 1, but instead lets aim to take the xbox 360 down a notch.
1 - Playstation Home - Like second life, this has potential to become huge. Very huge, its already here, it just needs tweaking according to many people's opinions. Sell virtual space to companies who wish to expand their business to the virtual world, much like second life.
Another idea for PlayStation home is allow for a virtual marketplace, allowing people to trade levels in LittleBigPlanet, game records, show off trophies, compete in tournaments. Do MUCH more than a little virtual dance club.
What I love about PlayStation home is that it's already here, and its in its very base form. I can see it being upgraded cheaply and being able to pull in VAST amounts of numbers, epically if it is marketed towards corporations who wish to expand their presence throughout virtual-space.
2 - Sackboy, Sackboy is Sony's new mascot right? Its been established. Alot of people find him adorable, alot of people find him creepy. It doesn't matter what your opinion of him is, Sackboy represents the Playstation 3. Thus, Sackboy should make many, many appearances in other Sony Games. If not to boost the sales of LittleBigPlanet, but to allow the establishment of new titles without the risk of sales being below 1million.
3 - Bundle, Sony should bundle something with the 399.99 80gig model. It doesn't need to be fancy, or expensive. Xbox 360 pro comes bundled with Kung-Fu Panda where I'm at. Kung-Fu Freaking...Panda. Does this change the value of the 299.99 Xbox console? Yes, I've still seen Xbox 360 pro's sold at 299.99 without the bundled in game. While the price remains the same, the value does not.
People enjoy value with their purchase. They like seeing a little extra for their money, thus if the 399.99 playStation 3 came with something from 07'... say, resistance 1. It'll not only boost sales to Resistance 2, but it'll boost playstation 3's sales without much cost towards Sony.
I've never taken a economic class in my life, all I know is what I understand from you guys and what reading these forums taught me over the years. So I hope these ideas have merit, if not. Let me know, I'm open to criticism.
Those are not bad ideas, IMO. Home could have potential for something much bigger, it just needs to allow two things: user created content and user-to-user microtransactions. I don't have a PS3 nor have I read up on Home, so I don't know if either of those two are possible, and if so to what extent. But regarding Second Life, the "killer feature" is your ability to make something and then sell it to other users. Very few things motivate people more than the possibility to earn money from what you like doing anyway. Once you get a few success stories of people making a level/clothes for avatars/whatever and earning a few thousand dollars from it, the floodgates will open. Since the PS3 is connceted to your TV, Home could become a new medium for all kinds of new content, and it might cross the boundary from "geeky computer stuff" to "everybody can enjoy it", something that even Second Life hasn't really managed to do.
Regarding your two other points, it would be cool to have your Sackboy as a playable character in Tekken and the likes, and I'm pretty sure it would benefit Sony greatly if they indeed did all they can to push Sackboy into as many games as possible. I don't mean it has to be a playable character, but just make an appearance in one form or another.
And about the bundles, IMO it would be a very smart move to bundle the first game in a series and thus get more people to buy the following parts. They could perhaps do it at cost so as to not actually lose any money. Which makes me wonder, how much would a PS3 bundled with, say, Motorstorm and Resistance 1 cost if Sony set the price at break even for them?