The OP is a very optimistic MS fan friendly prediction, but odds remain in favor of the hardware gap between the PS3 and Xbox shrinking by 2011.
Software releases are a wash at best; neither platform is particularly dominating over the other and for every "OMG Game Changing" soft title you can list for one platform, the other has an answer. It's more of an issue of personal tastes in soft libraries at this point.
Two things that could potentially be game changers are motion controls, which are a priority to different consumers than most of the current PS3/Xbox consumers, and continued price reductions to open up the market to lower entry price demographics.
As far as price reductions go, I'm not even going to throw in the overused "value" argument; the price is also a wash, with a nod going to MS for offering the budget Arcade model, even if it is not their primary seller.
Any price drops at this point, would simply be countered by the other. The only other way to push the price angle to the consumer is through added perceived value, which has less of an effect as hardware ages and becomes cheaper.
As for Natal, I still fail to see why people continue to pin their hopes on it as a sure thing "because it's Microsoft" or "because Microsoft knows how to market!" The one thing that will insure it's success will be how well the average non-gamer consumer receives the idea. A large part of that will have to do with how well the execution matches whatever hype MS is will to push through their marketing efforts. Same goes for SCE's new motion control system. Ultimately it boils down to how good the support is, and as of right now, nobody has a clear picture of what that will be by 2011.
