God of War didn't spend 30 years in development hell.
And this matters how exactly? The whole discussion was about how late into the console lifecycle new IPs are introduced, and in that regard the X360 currently seems to be on-par with the PS2, with Alan Wake being introduced at about the same time into the lifecycle as God of War. The PS3 is actually behind in that area, with the last new (retail) IP introduced about 4 years into the console lifecycle. This might change soon, unless of course the announced IPs also spend 30 years in development hell (and at least for The Last Guardian this seems to be the case).
Quantity is fine. Problem is quality. MS is much worse at cultivating new, successful IP than Sony. Stuff they finance, if it stays exclusive, tends to have a rather short half-life, often not meriting a sequel.
I don't really know about that... it seems that both have their ups and downs. This generation Microsoft piggybacked some very successful IPs from the last gen: Fable, Forze and Halo all sold amazingly well and saw a few iteration this gen. Even PGR which you considered "dead" saw two retail releases this gen (which is actually more than we can say about Sony's Gran Turismo).
All at the same time three of the best selling exclusive this gen for the PS3 are also from last gen: God of War, Metal Gear Solid and Gran Turismo - so it's pretty much the same deal. And even the success of Killzone this gen was founded on an IP from last gen.
Yes, Sony also cultivated some successful new IPs this gen: LittleBigPlanet, Uncharted, Resistance, Infamous, Motorstorm and perhaps a few others. But at the same time Microsoft also cultivated some of their own IPs this gen to different levels of success: Alan Wake, Crackdown, Gears of War (which was far more successful than any new IP introduced by Sony this gen) and a few others - including supporting original IPs which later went multiplatform and also became best hits (Mass Effect for example - which is an approach I actually consider better for both developers who retain their IP and for the gamers themselves).
Both had some decent one-offs that didn't actually evolve into a series (Kameo, Heavenly Sword etc) and both had their flops (Lair, Too Human etc). Claiming that one company is good at raising successful IPs this gen while the other does not is just blindly ignoring the facts. To create a smashing hit you always have to throw all kinds of shit at the wall, and see what sticks.
This is not to say that I agree with either MS or Sony's philosophy: I've had for example my share of complaints about MS driving their own IP to the ground and not understanding what actually made their games good (Crackdown VS crackdown 2 is a prime example I think).
A game that sells 5 million units was judged by more people to be good enough to deserve their money than a game that sells 1 million units, which in turn received a positive judgment by more people than a game that sells 500K copies.
This point of view is a bit flawed considering the fact that the people who bought the 5 million units didn't actually play the game before purchasing it. Some might have had some experience with a demo (which isn't always a good representative of the actual game), other played it at their friends, but the majority didn't really play it before buying it so you can't conclude from that how many people actually liked the game. It is entirely possible that 4 of those 5 millions actually didn't think the game is any good and were disappointed by it.
And this is especially true for big blockbusters that sell millions of copies at launch: for most people there's still no word of mouth going, or way to experience the game before making their purchase. There is usually a strong correlation between good games and sales because good games will have a strong word of mouth and sell over time, but there are many exceptions to that rule.
How is your rival making a huge mistake not lucky?
Ok, so now luck is a quantifiable feat? I'll go inform Cortana
But in that regard, isn't Microsoft just extremely unlucky? If a rival making a huge mistake is considered being lucky, having a rival pulling an ace out of their sleeve should be considered unlucky, correct?
Nintendo pretty much pulled an ace at the beginning of the generation, with a product that offered very high differentiation. Microsoft was trying to 1-up Sony who was the market leader last gen and they were pretty much successful at that, but then all of a sudden Nintendo came out with their Wii and catapulted themselves to first place.
Yes, they did well. But none of them crossed the 10m threshold. Combined, they don't even add up to Mario Kart Wii. For a fun comparison, here is the total of the top 5 exclusives* on each platform in the 3D era.
I'm sorry, but this comparison and the numbers you came up with are pretty flawed.