I don't see how Sony AND Microsoft's business model for their video game systems is "flawed". The price will eventually come down as it always has in the past. Initial price of $600 which probably cost double that to manufacture and distribute might be too much for some people.
Nintendo is barely hanging on in the game. They are focusing mostly on kids while Sony and MS are dominating every age group.
the other thing to add is that more consumers are demanding high end systems. they want cutting edge systems that push the envelope. stuff like that will cost money. unfortunately (for sony, microsoft, etc.) it doesnt really fit kids into the equation in the short term. kids will have to stick with xbox/ps2 a little while longer. however, the demographics are changing. the 25-40 age group makes up something like 60% of the video game market, and the research shows that this age group is usually relatively wealthy.