We still haven't established whether or not Sony is both willing and able to cut the price by $100 this year.

I thought Sony themselves established they weren't going to cut the price.

a $300 ps3 would be game over for MS

While I'm not saying the PS3 will defeat the 360 because quite frankly,  I only believe that possibly could happen,  towards the end of the generation and very slowly. (Since the PS3 is selling at a higher clip in relative time frames at a higher price, with a worse library (Atleast initially),etc   pretty basic economics). The question is though, can Sony drop the price quick enough to be able to grab what's left of the marketshare?

And saying that $ 100 dollar price drop won't do much this year is absolutely ludicrous.  From the start of this generation, one thing has been pretty proven.  The PS3 as long as it holds that 200$ higher price point over the 360 will be viewed as 'too expensive to warrant a purchase over the 360' to a majority of consumers.  However,  when it dips down into less than 200 dollar territory (Like $150 territory) it sells better than the 360 as a whole.

This all has to do with the mindset that Sony has put on consumers. The PS3's value by the average consumer is assumed to be definitely 'higher' than the 360.  The problem is, this value ends at that 200$ price difference.  People as a whole DON'T see the PS3 as $200 better value than the 360.

The ONE thing Sony has in it's favor is that they have tons of ceiling space and breathing room for their product.  Microsoft can't go much lower than 100$ IMHO and I believe it will be quite sometime until we see them go down that low. 

I would wager $100 price deduction would have the PS3 at very WORST selling about on par +/- 1000 per week.   Mind you even a 100$ price deduction on the PS3 would still give Sony room to drop the PS3 to the 'sweet spot' of 200$ .

Well they won't confirm/deny any price cuts just as you won't confirm/deny your level of involvement with the Ghostbusters game.

1. I could have swore they flat out said there will be no price cut this year (fiscal year I think).
2. I've confirmed my involvement I thought, I just don't feel like telling everyone what levels I've worked on.  :-p

Xbox 360 still has a lot of options to it, Although your idea of 1 free year of xbox live gold has some merit. Although 1 free year is too much, I can see them including a 14 day, or 1 month trial with every Xbox Pro and Elite to help boost sales of Xbox Live Gold.

I don't think Microsoft would accept defeat from a simple price-drop. Obviously Microsoft knows that sony has a price-cut lined up and will have they're own options to counter it.

Microsoft will for the forseeable future retain a much higher revenue stream from the home console space than Sony. Microsoft gets more software revenue and they have a whole other side with regards to Live subscriptions which gives them every incentive to cut the price aggressively to increase the install base substantially.

As time progresses the advantage Sony has maintained over Microsoft erodes. The name "Playstation" becomes less valuable as the install base of consoles not called "Playstation" increases. Its a network effect which is working against Sony's favour as time passes.

J): Leave the gaming industry :)

Denial is the standard response. You can't actually trust that, because they will deny something right up until the time they confirm it.

You would tell us which levels you're doing if there wasn't an NDA waiting to dismember you Dead Space style.