Let's correct a common misconception. You do NOT need an Xbox 360 hard drive to play games on Live. You do, however, need the extra $50 memory card if you don't get one. So the price of even a Core system if you want to play online is $350. That's without a game, though you could add an Xbox Live Arcade game like Geometry Wars for just $5. And yes, the core system comes with a Wired controller, not wireless. And no headset, but you don't need it to play online (voices will come through your speakers instead).
Second, no one is going to look at a Wii game and and Xbox game and say, "Oooh, for only $50 more ..." The people Nintendo is going after with Wii are the ones that don't have an HDTV (and don't see any need to get one, because they can't tell the difference in the picture quality*) so the idea of the Xbox 360 being in HD doesn't appeal to them. Plus, those non-gamers would be turned off seeing something like Tom Clancy anyway. All it takes is one demo of Wii Bowling or Wii Tennis, and they'll be sold. At least, that's the idea.
We keep comparing the Xbox 360 to the Wii as if they are competing. For the first time, I think I can honestly say that I don't see many places where Wii and Xbox 360 would be competing with each other.
Third, I do find the argument about controller prices to be 100% valid. I have two wireless controllers for my Xbox 360 ... enough for myself and my wife, and have no desire to get any more. Xbox 360 is primarily an online experience, so if I'm playing with more than two people, odds are it's online. My N64 and GameCube had full complements of controllers specifically for parties ... since you need all of them for games like Mario Kart and Mario Party. This does make the price of the controllers a bitter pill to swallow, since I know I'm not alone in this respect. Given that Nintendo is historically slow to give access to the online components of their consoles to developers (even now, there's complaints about Wii's online features being a mystery to developers), local multiplayer is a big deal. Even more so when you realize that having four drunk people flailing their arms about is at least half the fun. (Watching my mother-in-law play Mario Kart after half a bottle of champagne is a treat.
*Before you laugh, research shows that more than half of current HDTV owners aren't getting an HD signal and don't even realize it ... my in-laws being a prime example. They had a 57" Hitachi rear-projection LCD HDTV for over a year before they ever saw anything in HD on it. The first thing they saw was my Xbox 360, and they couldn't have cared less (though I did eventually talk them into getting a Comcast HD DVR).