Why can't we have this with a more powerful machine at $399 that breaks even?
We definitely can. I think a 6670 is probably very much lowballing what's going to end up in the nextbox. However, a packed in kinect would definitely limit what they could put in the box if they wanted to keep breaking even. While there's still a chance they'll stick to their old business model, they're probably considering the following points:
- 360 came out with high end graphics and did not do gangbusters for the first few years
- Wii did not come out with high end graphics and Nintendo made far more money with their console than MS did with theirs
- 360 really began picking up steam at lower price points
- 360 started making headlines and breaking records once kinect came out
- Kinect is the catalyst that has driven them into the minds of the mainstream consumer
- Kinect is likely the best method they have on hand that'll get families to use xbox machines as living room multimedia hubs on a widespread scale
- Being on graphical parity (though likely still more powerful) with Wii U would still give them access to 3rd party ports and allow them to price cheaper on hardware
- Hardcore gamers have an incentive to stick to the xbox brand even if they're not cutting edge because of live. Casuals have an incentive to stick to the xbox brand because of kinect.
Conversely they're probably also thinking
- The 360 became established on hardcore gamers who love graphical powerhouses
- 360 was able to receive as much 3rd party support as it did because of its graphical power and online network