Well, yeah, but it also costs extra to implement a DVD player into the device. That's why Nintendo is able to sell the GC for $100 even though it hasn't been out as long as the PS2.

As for HD, it doesn't really matter to me either. I don't have an HDTV, and my family didn't have a DVD player until 2002.

Doesn't the PS3 have much better graphics than the 360 though?

I believe they are quite a bit better from the looks of the PS3 launch games. BUT remember that the 360 had an emmensely fast development cycle whereas Sony is playing it safe.

I don't think it is that much of a difference that it will severly give Microsoft a disadvantage. Afterall, the PS2 is the weakest system of its generation and it soled the best. I'd say the difference is comparable to the difference between PS2 and Gamecube.