Because a keyboard and mouse are not suited to the idea of a console in the living room (the intended norm).

A gamepad is no substitute. An IR pointer could be though, or as EndWar tried out, gamepad + voice commands may work.

Wasn't that because of the graphics card manufacturers that XBox support was dropped?

ROBOTECHHEAVEN
One swallow does not make a summer & wars has not been out long anough to prove or disprove a thing.

A larger, more active install base will also ensure you get some sort of support as the next generation begins. There's more money to be made from X360 owners than there was from XBox owners.

So the current consoles will pretty much remain the same keeping the price down and get bolted into some form of media box for the living room. Does this mean Patchter could be right??

He could be right about their intentions. But customer preferences can often get in the way of such master plans.

"Media box for the living room" Good god, ether sony was wrong and a (media box) PS3 was a bad idea or its a gen ahead of its time. Blah

Or was just way too expensive.

So why not just make the game(s) and bundle them with a controller (if possible) that would be suitable?

No need to make an entirely new system (or lack there of) just to have a new control scheme.

I don't know, maybe it is just me. I just know that I think things are fine how they are and wouldn't mind having the current consoles last another 6-7+ years before anything new comes out.

You could have said the same thing about the Wii-mote.

They're taking the approach that hardware is a software enabler, not the other way around. It's the right approach, I'd be glad of it except that they may be so ambitious that the console ends up too expensive...

A versatile controller with the console means that it's much more likely to get software support (as third parties can feel comfortable with the market penetration of the controller).