I agree with Bloodworth: it was a missed opportunity.
People like to say the GDC is just for developers to shoot the sh*t with each other, but that is only true in theory. The reality is if it was purely a conference for developers, the media wouldn't have been nearly as present as they were, or present at all; Chris Hecker would have been able to say whatever he wanted about the Wii without having to be forced to apologize to an angry public; Sony's announcements wouldn't have done a thing to repair their public image with the PS3.
The GDC might not be the grand event that the E3 of yore was (R.I.P.), but with media there and actively reporting its still very much a public affair. In fact, when you look at it, the GDC and E3 are pretty much the same except E3 focused more on the "Expo" while GDC focused more on the "Conference". But they're both composed of the same parts, especially now that E3's been downsized.
Microsoft can say that showing new products wasn't the point of GDC, and to a certain degree that's a valid excuse. But they can't dismiss the idea that if they had presented more of a showing it would have been just as received, publicly, as anything they'd shown at E3. Sony knew that, and capitalized on it.
(in fact, now that I think about it, when the gaming community first found out that E3 would be downsized, wasn't the one consistent argument used to rationalize it the idea that developers would now be forced/encouraged to release big news at smaller events more frequently throughout the year, instead of saving it all for E3? What happened to that idea?)