I suspect Sony will keep Vita focused on the core gamers for a long time. These people may pay slightly more $$$ and more consistently for a focused gaming experience. If they want to target other users with Vita, it may be easier to reuse Vita guts in a mainstream form factor (like a tablet).
Well if you mean by core hardcore, it is not like they have choice, the average gamer won't buy a device at this price (same for games). I insist that the use of core hardcore and casual without more details means nothing, everybody that play usually play the same games as the hardcore, the biggest group in "social" gamers are +45 year old women.
The average gamer won't pay much nor care much for super advanced functionality, they are likely to have a tablet for that (related to that is the perceived value of handled), I do not think that that is the issue.
The issue is that what you describe here and below is nothing more than "business as usual" (from the handled manufacturers pov), clearly tablets and phones sales are affecting that market, but at the same time the reaction of the manufacturers is a bit staggering (aka imo no reaction to the most disruptive event in the history of handled consoles).
Whereas I don't have that much faith in Sony execs, I wonder to which extend the new management would have green light the project (or it could have too late to abort), the design of the ps4 (ram aside but we are to find out soon how that affect the system cost) relies pretty much on off the shelves blocks. For the PS Vita is pretty clear that Sony over did it, tweaking, to be abandoned, A9 cores, to be abandoned GPU, going with a non UMA design, etc.
By the way I don't think that Vita hardware will be re-purposed for a tablet, it is already no longer good enough. Putting aside proprietary CPU and Sony as none (Shift and Krait), any competitive tablet onward will be powered by A15/A7 combo, equivalent of better GPU, lot more RAM and faster (I'm not sure about the type of RAM the PSV used, wiki and Sony website did not give much info on the overall hardware). Shrinking the PSV to 28nm will still get you on the wrong that of the technology curve.
To compete on a market under unprecedented pressure Sony should have cut down R&D costs and integrate existing IP without over spending on minor tweaks, time line were wrong with 28nm just behind the corner (and Sony had no significant pressure, they did not need to rush the product).
Another issue is some of the components they use are too expansive and imo useless wrt system main use, namely the fancy screen, it is really good actually way too good, from the resolution to the cost, to the point that the system can't push enough pixels to render at that resolution with a level of detail you would expect from a gaming device. But that is an issue with Sony sometime being a costumer for Sony, not always for the best. Anyway the screen is over specced, at that price those who buy have a healthy budget and living standard, it shows in this very topic, both you and Arwin have tablets and not cheap one, Ipads. The relevance of the Vita as a media (or more social) device is an "aside", it won't sell devices.
Back to that "core" thing, looking at Sony portfolio of IP, really rich focusing on hardcore with a beefy budget is also another mistake, they have the IPs to address a lot of the market from kids to adults, they won't reach kids (or your average parents) with a 250$ and 50$ games.
It is barely disputable that the business model for handled needed to evolve and it is pretty clear that neither Nintendo (though you would expect that much from them) and Sony did not do their homework properly.
It looks like Sony will have to build Vita's value over time; like how they built up PS3's library painstakingly for the past few years. PS+ helps to increase Vita's value and utility but it won't differentiate Vita. Besides the exclusive Vita games, they will need to find an identity for Vita. e.g., If it's supposed to be the best Gaikai client, then they may want to run Gaikai server on Macs and PCs as well (so Vita can be used "everywhere", even beyond pure gaming). If they want Vita to be cutting edge, then it better work with Occulus Rift and other VR headsets. If Vita want to be the king of mobile gaming devices, then it should work with iOS and Android games as well (perhaps as their local server even). So on and so forth.
At that point, hopefully they have lowered the BOM cost enough to go for a sustainable and substantial (enough) price drop.
Building value over time will costs them a lot of money as they need a lower price to built a significant user base, without user base it is mostly a game of subsidizing either software or hardware /losing money.
I don't see the point of Occulus rift /vr sets wrt to vita, at all.
Anyway Vita won't be the king of mobile gaming, that is pretty clear at this point, and it should not make Sony any significant amount of money either (with the rebates this fall I actually wonder if Sony is already loosing some money).
I would not expect the PS4 to have a significant impact on the psv either (as I think those that would go for such an expanse have mostly already does so).
Either way to get price down Sony will need a shrink (costly reimplementing IP no longer in use on 28 process), a lesser screen, etc.
Imo they will be there quiet too late, as without (imo and my opinion only obviously) a proper offering on that market (both nintendo and Sony) the market shrink faster than it should / loose relevance faster than it should.
Anyway, I'm quiet disappointed by lot of the hardware gamers gets of late from the 3ds, to WiiU to the PSV. I know that we (gamers) could have a better offering but years of subsidizing have sort of lock down the market along with the fact that some segment are not that profitable either... well I'm not happy with the offering "overall", even the HD twin by design still have to reach really low price that is after 6/7 years on the markets... The whole thing is more and more tedious to me.
(most houses over here work the other way around, but ours is placed along a street where a train/tram used to go, so the street is about one floor up from our back garden)