That's totally irrelevant to Nintendo, though. The price is so high, even though it's slightly improved GameCube hardware with a cheaply-developed pack-in, because Nintendo is selling their system at a profit in hopes of making money, while MS continues to sell theirs at a loss in hopes of getting market share.
Let's say, for argment's sake, that Nintendo is making $80 of profit on each system sold, though I'm sure at that price it's more slightly higher. Let's also say that Microsoft is losing $50 for each 360 sold, though I'm equally sure it's slightly higher than that. Nintendo sells 500,000 units in America this holiday season, a figure they can easily reach with a brand new launch, while Microsoft sells 1,000,000, based on stuff like Gears of War and people coming to your "it's only $50 more!" conclusion.
The outcome of that scenario is that Nintendo is now $40M richer, while Microsoft is $50M poorer. And as much as we bitch about the price, remember once again that we're not necessarily Nintendo's market here. You can buy a Creative Zen MP3 player with more storage space than an iPod for a lower cost, but guess which one still moves the most units. This is exactly the approach Apple takes with every single one of their products and it serves them very well--as it has served Nintendo in the past. You don't like the price, and I'm not crazy about it either, but it's exactly correct from a business standpoint.