Slim consoles require chips more energy efficient than plain ones , XB360 just went out from RRoD nightmare, MS won't risk another releasing an hypothetical 360 Slim too early, or they could, but it would require either a more costly full aluminium case or smaller, but higher output, and so ultra-noisy, fans, or a costly liquid cooling.
But as a cheap XB360 didn't kill an expensive PS3, all the more reason a cheaper, but still more expensive than XB, PS3 won't kill a now cheap and successful XB360, maybe a cheaper PS3 will make XB360 end this gen 3rd, but earning a lot of money anyway, and most probably ending 2nd in USA, so MS could be satisfied without risking and/or losing money on HW.

If Sony cuts the price before September MS will do nothing, even if Sony manages a 100K per week advantage over the 360 from March to September worldwide 30 weeks at 100K would only take 3 million off the current 360 advantage.

For next christmas I'd expect to see a $175 Arcade, $250 Pro, $300 Elite and some brand new bundles.

Microsoft will release the Slim in time for Holiday 2009 - most likely around August-September with a lead time of ~3 months. The Slim is due to begin fabrication around May in 09.

The Slim should see a major reduction of costs since there's (literally) less going into making a X360 - just like a PStwo.

The slim alone could damage Sony's price cut...Not in the way of 'Oh man, the Slim is killing people from buying the PS3!' but more of like...Giving the X360 higher sales, negating any sort of shortening of the gap in 09.

I think that, we're at the point, where every system is 'locked' for sales - X360, Wii, PS3. As of now, every company is only fighting with itself to deliver better sales, because I don't see ANYTHING happening to change the order of the winners/losers in the console wars.

Wii will be 1st. There's nothing MS or Sony can do about it. However, Nintendo can make the right moves with the Wii to where that 1st place could be even more massive than we imagine it to be.

X360 will be 2nd. There's nothing Sony can do about it. But there's nothing MS can do to cut into the Wii's 20% marketshare lead. However, MS can ensure that it stays around the 30% area indefinitely.

PS3 will be 3rd. Sony cannot do anything due to that massive gap in sales (MS leads Sony by around 40% currently). However, it can boost it's sales to ensure that it maintains that ~20% marketshare indefinitely, and maybe make up some ground when the next-gen transition comes about.

This is not true, Microsoft can make another price cut if they want to, cos microsoft is actually making money on each sale of their console, unlike Sony which is loosing money on each of its sales. So MS can still make a cut with little loss, Sony will just deepen the pits it is currently situated in.

^^
MS is making money on arcade XBoxes?
So adding an 80GB HDD and putting a BD reader instead of a DVD costs Sony more than $200? Are they buying them at end user retail prices?

1. PS3 price reduction will not erase the changes that the 360 caused this holiday season. I doubt the sales difference would be where they were before MS made changes. Multiple reasons. Momentum and more and more people will know friends that have 360's and they will get one as well. RRoD is becoming ancient history with Falcons and Jaspers. 360 will still have a much easier entry point.

2. 360 price reduction will not be immediate counter to PS3 price reduction. MS will wait until the right time. I expect $149.99 Arcade, $239.99 Pro with 120GB HDD and $319.99 Elite with 250GB HDD.

45nm version of the 360 which would -$50 on all 360s. ps3 is doing the same too.

I'm quite certain that MS's goal this generation was to be the market leader and turn an overall profit for the generation, not be a distant second and lose less money than Sony.

Look at the sales of Wii Fit!