I think you American kiddies should be thankful how cheap your consoles have been for so long.
Here in Australia we have low population density and high shipping costs. We have always paid 20-80% more than you guys on all hardware and software since time began.
In the US it's not uncommon for companies to sell consoles at a considerable loss and make the profits back on games.
Consider for a moment the hardware we are talking about in these consoles. The XBox360 is talking about three PowerPC970 processors, and the PS3 similarly specced/performance Cell processors (based on the PowerPC design with a few modifications). That's starting to get into the processing power of midrage professional 3D workstations and powermacs. It's not uncommon for these to retail at US$1000+, so seeing a console with thise sort of power going for $US 300-400 is a steal, when you think about it.
And outside of that, consumers are the ones who have started this "who's got the most bling factor" contest among consoles. It seems people care far more about how many billions of polygons a system can push, or what final resultion or shader level it supports rather than the quality of the games bundled. And as long as that happens, console makers will sacrifice a price-point to make sure they have the most whiz-bang system on paper.
But no matter how great consoles seem to be, it doesn't stop the fact that one in ten console games are utter tripe with no playability or replay factor. Perhaps online gaming will fix that, but you sure as hell don't need 3GHz of processing power for that.
