What are you thinking XSX will be priced at then? (assuming the 56CU, 12TF github data is true). Even if they matched Sony at £399 you wouldn't transition your entire population over. £399 is around the regular 'new generation console at launch' price and only a percentage of the population will transfer over, the early adopters. If the XSX price is £499 or higher then that'll drive off another percentage of the early adopters as well. If your only market at launch is the 'premium' crowd you've seriously limited your market.
It's been mentioned in the 2020 sales thread as to why MS didn't catch up in terms of sales when they got the power crown back with the X1X. Reason was because they'd taken a hammering for 4 years and there was a mindset out there by then. Playstation had the momentum, if you were a kid then chances are your friends played on PS4 so you'd buy a PS4. Success breads success. By the time the X1X launched it was too late to turn the tide. I hope they've learned the lesson that if they want to do better they need good sales from the start. If they launch a 'niche' premium product at the start then it won't get good support from third party and Sony will romp away with it again by a large margin.
I think MS shouldn't go higher than $499 USD. It would be a premium cost like X1X.
As for catching up, they were never going to catch up. What MS bought with X1X aside from building back their goodwill with their own customers are
a) fully fleshing out their BC technology (with upgrades)
b) fully understanding how to do boost mode and AF upgrades
c) understanding up front how to test/develop and cool a device effectively
d) understand the sales data between their lower priced console and their higher priced console
e) know consumer feedback on how they feel with the new X1X.
So you've got this halo/premium product out now. It's expensive. So how do you make it cheaper for buyers to buy into the ecosystem
a) fully BC back 3 generations with X1X upgrades to boot (all saves on cloud - no transfers necessary)
b) controllers and accessories fully back compatible
c) game pass to give players instant libraries with fresh new exclusives titles with minimal cost.
The biggest challenge with new console launches, is the setup cost to get a new controller and buy some games to use your device with.
With this new setup, the total cost to get into the ecosystem is significantly lowered. So it may work out well with budget minded people here.
If you suspect that PS5 is $399, well add a controller and 1 game and you're north of $499.
With XSX at $499 and say 1 free month of game pass (15 days, is what they gave us for X1X) you're at $499 + 100 games and new exclusives for a small while. Controllers transfer. It's not a terrible deal.
As long as people feel justified in their purchase they will be happy about it.