My feeling on it is regardless of the advantage one might have over the other, in terms of games, game titles will be more than likely produced for one over the other .. except for the exclusives .. which both pretty much get their own. Both will run the games relatively close in graphics, one machine having the edge over the other.
If the Xbox 360 runs the games with the same kind of edge in graphics as the Xbox currently runs them over the PS2 .. with the PS 3 having 1080 P and blu-ray, personally, it will have a much greater appeal to me.
I dont have ANY machine that is capable of outputting or displaying 1080p and the only HD playable devices I have are my firewire STB and my JVC D-VHS player and a HD DVD player will move both of those machines down the list as my most favorite device.
Even if the blu-ray doesnt get much support from other studios, Sony itself has enough movie content to make the blu-ray viable by itself, and just like with the PSP and their uni-disk, they wont have a problem making a buck on content for that format.
Microsoft is requiring content makers for the X360 to make their games run at 720p or 1080i only, which is nice .. and im betting most of the content for the PS 3 will follow suit, though i havent heard that Sony is requiring that.
This one isnt even close. If at release the xbox 360 will not be capable of 1080p output and will not have a HD optical device I dont think it will be winning any console wars with Sony.