I can't speak an opinion about the Xbox being a PS3 owner but none the less, since I am a heavy PC user and play my games on my console instead of the PC (well spare Battelfield 1942

) I have the PS3 hooked up to my KVM box. When I am playing a game, my PC is one click away any time. Additionally, whatever savings Microsoft makes in hardware they will loose in software R&D. Now granted the software can be reproduced at no cost after development (virtually) this still doesn't handle all issues of why we need consoles to begin with. This is an apple like approach. Give everyone the identical hardware and software so that the same piece of software runs identically on any machine. And that's without forgetting that PPC ---> X86 software emulation would take a lot of performance overhead due to emulation layers that would need be present it would be pointless to boot.
Matter of fact I have found the opposite to be a better approach. Why not make the Xbox and the PS3 personal computers instead? The PS3 does it in a decent way (has some shortcomings like RSX blocking, hypervisor yada yada yada) I run Fedora Linux on my PS3 and I enjoy it to certain extent.
But what I would have really really loved to see, is a piece of software that could run inside Linux on the PS3 that would give direct access to the PS3 features. And if Microsoft does the same sales would boom.
But I understand why companies don't want people to find the consoles that good, they are concerned of people buying consoles with no intent of buying games much since consoles are sold either at cost or loss it would be a bad idea to open it up to others. I hate that fact but that is the nature of the business.