Xbox live updates

I was reading this article on xbox live updates. For one thing, now a console maker doesn't have to come up with a new hardware design to have technical progress. So this eventually might slow the rate at which new consoeles are developed. The PS3 has enough power as it is for me.

One thing with new consoles is why don't they release it at let's say 1,000 dollars at a limited supply? Then cut costs every 6 months or so? I mean some people are willing to pay that especially if the supply is limited.