One thing I would comment on Pez.
Nintendo may have a similar and even more powerful machine than X-box, but they market an entirely different audience and have always done so. Nintendo goes after the younger kids, 13 and under usually. X-box targeted adults (and from what I understand, will continue to do so but try to grab some of the middle aged and older teenagers from Sony).
Sony is the only console that has targeted all the ranges and really only because they have had their system out longest (PS1 and PS2 backwards compatibility and all).
I do think X-Box will continue with the older gamers as the primary source of their revenue (since they have more money anyway). I just hope they can figure out a way to make it backwards compatible. I dont want to have H2 for a year and then not be able to play it on the new machine. It took too long for the damn thing to come out!