I don't think Microsoft needs to, the Xbox 360 software library is vastly superior to the PlayStation 3s.
I don't see how it's "vastly superior". IMO, the 360 has the edge on downloadable games (though that's evaporating over time), and PS3 the overwhelming edge on exclusive titles. In the end, the two are about equal, especially since both platforms tend to get the same 3rd party games.
That said, the 360 has sold a lot of hardware lately, and its software consistently outsells their PS3 counterparts. I don't think Microsoft's too worried about the PS3 only dropping $50. At that price, you either already own a PS3 or you've been waiting for a much lower price tag (probably $199).