What Sony should be doing is putting out a third system that does not have the Blu Ray player built in to it. Me? I could care less about it. When the time comes that I'm forced to upgrade to HD-DVD (and it won't happen until I'm forced), I'm buying a dedicated HD-DVD player, not a PS3. With the PlayStation's breakdown rate in the PS2 era (which I attribute to it being used as a DVD player), I wouldn't want to put all my eggs in one basket relying on the PS3 as both a gaming system and an HD-DVD player. It breaks down, I'm screwed on two fronts instead of just one.
Nintendo has it right. Focus on gaming. Leave it at that.