If I were to design a console it would be less powerful than the most expensive one of the time, but close enough that games from that system could be ported more or less intact with the resolution and detail settings dialed down some. That way I could come in cheaper, yet offer the same games. If I had any additional functionality I wanted to include, such as motion control hardware and/or media center software, it would have to make the final price of the console no more than that of the competition to include it. Even then, I would be hesitant to put out a weaker console at the same price as the competition because I know they would trumpet that fact to high heaven.
Microsoft got everything right but the price, which means that they completely missed the point. Nintendo got nothing right but the price, which means essentially the same thing. PS4 will win this round handily, and for good reason.