I think Nintendo has to match everything that the competitors add. It may up the price to 299$, but this is the position they put themselves in. The GC is in a tailspin, and to recoup any market share , they will have to basically blow the pants offf of EVERYONE, not just Nintendo fans who will blindly buy the next console anyway. I'm hearing some industry folks begin to speculate about the Revolution...and it's always a 'Wow!' type reaction. But since I don't know specifics, I can only assume Nintendo is trying to truly revolutionize gaming. So perhaps they have learned their lesson.
Xbox 360 is all the rage right now, and Microsofts share is growing with every week that passes. If MS wows people at E3, I think it's a foregone conclusion that the Xbox 360 will be hugely successful. People who own the Xbox staunchly support it, so I expect them to buy the next gen Xbox as well. The problem for Nintendo is, Microsoft knows it's target audience, and markets directly to them. Nintendo tries this 'everyone' marketing, and all that does is dillute the overall message. People in the industry think the GC is a joke,(some still believe the PS2 is a better machine,technically, than the GC) and I just hope this Revolution can bring Nintendo back into being well respected for making incredible consoles.
Just to clrify what I mean, I had an argument with a fellow tester about RE4. He said he'll just get it for PS2. I said, 'well, you'll not get the same look'. He actually thinks that the PS2 version will be a better game graphically. This is the uphill battle that Nintendo faces.