All consoles are out of date the day they come out. They spend years in development, and the final spec is defined long before production rolls out.
You're right though, the lack of for sight (or desperation to reach market first) meant that the 360 is lacking without the HD video and WiFi element (and HDMI). Or it was, but they've kind of botched it right now.
Thing is, if they'd have asked me, I'd have told them not to go to market first. I've studied the consoles for a long time, and the most powerful often fails, especially if it IS first to market.
I've discussed this (here I think a few years ago) with lots with people. It's all about timing and maturity of the market.
People generally don't want to move console (the majority of people, not early adopters), until they feel they have had value for money out of their current set-up. I'd say, depending on income, this is between 3 and 5 years. As most people don't get their console until about 2 years after release, you are looking at between 5 and 7 years after a console is released, that the majority of people are looking to move on.
So, the absolute earliest MS should have been looking at release, was late 2006. Okay, so they met that, but it's a risky time if there's another console (or two) on the horizon. Most people will sit back and wait in a 'comfort zone' of the full 7 years. Why adopt now at the earliest time you can, when waiting just another 12 months gives you the opportunity to pick between the lot. Most will wait yet another 12 months to be honest.
The Wii has thrown it a little this time, as it's a lovely little 'interim' machine, as well as finding a new audience.
So people will wait about 7 years after a console release before they move on to the 'next gen'. They then look at the market, and look at which is the 'newest console'. Even if the first to market is technologically the best, it's seen by the GP as old hat and dated, so they tend to avoid it.
This is what is now happening. People are now READY for a next gen console, and see the 360 as being old and doddery. It's not true, but it's just been around too long.
It happened before with the Dreamcast and PS2. Prior to that, the PSX and the N64. Before that, the Atari Jaguar (actually, that's a funny area - every one of that 'gen' failed. the best selling console the year the Mega 32 (whatever the replacement for the megadrive/genesis was), Jaguar, 3D0 and, erm, the other one - was the Sega Megadrive. All of those units failed to work out, because they offered too little, for too much, to a too highly crowded market.
So, never come to market first, no matter what!
Anyway, games
I finally got Half Life 2 working again on my home PC! It's taken months, but it's fab. I shall now invest in the Orange Box I think
