Again, I feel this XBOX VS. PlayStation soap opera may be a little mute at this point for 2 reasons:
With Tablets and mobile, the segment for these gaming machines are actually fairly small. Large enough to make these devices important and profitable, but no where near the segment it was when the original XBOX launched. A lesser priced XBOX just makes sense, while a more powerful XBOX will, in my opinion, still sell more. Why? This small segment is willing to pay for a top end machine, The "kick back" about the Kinect was mostly, in my opinion, from a group of people who won't buy anyways, but would like to. But they will settle for gaming on cheaper, portable devices.
Secondly, the XBOX is being positioned as a long term media device, not just a game consul. Obviously, gaming is at it's roots, but Microsoft is going to push all kinds of media to it while the PS will be aimed at gaming, with the ability to get media. MS wants the media to push the sales in the future. It is a long term strategy, as is the case for MS these days.
Like the removal, because a bump in sales will be nice for the PR circuit, as is the "we are listening to you" line. But long term, I would be shocked if the higher priced XBOX unit didn't double up the sales of the lower priced one.