First off I have to say great start with the 360, but you getting close to messing it up. Why are you release a new 360 SKU? Your new system can not compete with the PS3, I see why you are releasing a new Hard drive, but why not just make all portable hard drives compatible with the 360. Or make a bigger one but ad it to the current SKU. If you think you must make a new SKU, put the new 65nm chip, HDMI 3.0, a larger hard drive and the HD-DVD drive. And let it all go for under $550. I know it's crazy but if you want to compete with the PS3 for the hard-core and Techies you gotta do it.
Next up Japan. All I can say is stop trying. It's a waste of money. The people over there are to loyal to Nintendo and Sony. It's easier to sell to first time buyers then to people that have bought a console from the same company for that last 3 consoles cycles. Focus all your resources on the US and Europe. You could maybe start thinking on China, it's only a matter of time before that market explodes.
I have to say I like what your doing with digital distribution. I think it's the wave of the future. I hope you stick by it for the long haul. One thing I think you should ad to the Video Marketplace is more Movies and T.V. shows obviously and maybe more of a Netflix way of rentals. Say $10 a month (twice that of Netflix) but say unlimited downloads per month. You have much less cost then Netflix because you don't have to pay for the DVDs or the shipping or anything else, just licensing.