That the significantly cheaper Wii, with much wider potential sales from the "kids and elderly" demographic that Nintendo make a point of targeting (or to be less inclined to marketing BS, the fact that Nintendo has always had a fantastic spread of games to appeal to younger and older audiences), has sold so well is no surprise. It's also a sweet price point with no "better" console to make you feel you were short-changed by your choice - you can't get a SuperWii with an HD.
That lack of decision making makes a Wii an easy snap purchase.
What is telling is that the PS3, widely held as a poor seller, has managed to gain so much ground. In under a year, a massively premium priced console with a fairly poor selection of games has managed to sell half the number of units the X360 has.
The 360 is heading for a revamp - I'm thinking (and I've been thinking this since the Elite was announced for the US; there is now evidence to suggest that part of it is already happening) that the HDMI-port equipped Elite was merely going to result in all models having an HDMI port, and that as the 360 matures it can be repositioned to take on the Wii and the PS3 comprehensively.
The Wii is currently £179 in the UK; the Core 360 is £199, but you know there is a better model in the premium which has compelling additional hardware. With the new HDMI equipped motherboards not appearing in Core systems, I think that (maybe before Christmas, certainly next year) the Core will be dropped in favour of a £179 or £199 (the lower price point making it head-on competition for the Wii) with a 20GB HD, but wired controllers, model. This offers a quantifiable upgrade over Wii's on paper technology for the Argos catalogue type buyer.
The premium system, currently £279 pretty much, would then carry the 120GB HD and wireless controllers. It oocupies a unique slot in the marketplace and the large HD would be compelling to people considering the PS3 but unwilling to spend so much.
And the Elite should be repositioned to £379msrp (currently £329) with a built-in HD-DVD drive and 120GB HD. This, unlike the present Elite, offers a serious technology advantage, and would also allow MS to drop the HD-DVD upgrade if sales are poor. People will always buy the expensive console version. Of course, as an Elite owner I'd be narked if this happened before Christmas, but it's also a price hike.
At £379, the Elite lacks integrated WiFi to compete with the PS3, but there is a larger HD, better games library, and of course the external WiFi module is available.
I've no vested interest in 360s selling; I've got one of each of the consoles and I think they have very different qualities - the Wii is the ultimate party console, great fun, the PS3 has the most interesting technology and a lot of promise, and the 360 is a really good all rounder (I've played one and ordered a UK Elite, so I haven't spend ages with it). This is pure speculation, but I am amused to see that the logical step of all 360s having HDMI is being taken - so wonder if the other logical steps will follow.