I don't think it's far fetched. Both Sony and Nintendo went on record as saying they thought MS were rushing things. Plenty of software developers agreed. If MS weren't desperate to drop their money-losing XB and rush into a potentially profitable, and certainly not financial bomb-hole, platform, with PS2 sales remaining upbeat I think Sony would have happily planned to launch around mid 2007, perhaps postponing if 65nm wasn't up to speed, and at $400 to boot. Putting it another way, what does Sony have to gain by wanting to launch end of '06 with a $600 device? The only benefit is immediate market share, which is only important regards competition. Certainly launching earlier hasn't landed them more profits. Launching later would have been better for the bank balance. If the current 5 million PS3 buyers weren't buying until 65nm was out, Sony may be looking at $200 a piece savings, or $1 billion more in the bank then they have now. No XB360 in '05 would have meant no PS3 in '06 IMO.
There's plenty of holes in that theory. If anything, the Wii slowed PS3 sales down. There's no problem with launching a console at $600 because initially, that's what people will pay anyway. The only thing I can agree with is that if there was no competition at all from any platform, then perhaps they would have only launched in Japan first, to test the waters, as they have done in previous generations (but if they could have I think they would have done that in Japan in March 2006, as I think was their original plan).
If the blue laser diode hadn't been an issue, then I'm fairly convinced the $600 PS3 would have cost about that much to make, which would have been fine. Now, I think that the $399 model actually costs $399 to make. The difference is that if they didn't have as much competition, they could more comfortably have dropped the price of the PS3 depending on whether or not the PS2 was still doing well and/or whether or not production/demand no longer matched the current price, potentially opening up possible pockets of periods with hardware profit. There are always people who start buying at $600 (like me, and I feel like I got excellent value, some of the best value I've ever gotten from any hardware purchase so far), and even if the 360 launched late 2006, why would Sony have voluntarily left that market to the 360 all by itself if it would have been *relatively* painless to launch that same year.
Another big hole is just looking at the time at which software development started. Each year of development costs considerable amounts of money, and I'm very sure that each year of software development before a console's launch is progressively more expensive, while many third parties would have either killed you, or if they had known, simply started their development a year later also, a disadvantage which would have been the exact same advantage that the 360 has capitalised on in todays reality.
Also, if you look at the progression of sales success of the PS2, then a holiday 2006 launch would have resulted in a natural transition period from PS2 to PS3, something which would have been pretty much perfectly timed even now if it weren't for the Wii, which has been messing things up there a bit. Having a Playstation model around for 5 years as the major platform, and then another 5 years as the minor platform is a fine and tested model that Sony must have been aiming for from day one.
Unlike Nintendo could for some stretches of time with the Gameboy, Sony has never been in the position to play this game as if you're going to assume that at no point in time there is going to be any competition. Sure, some of your points would hold if there was never going to be any competition at all, but then Sony could have done pretty much anything it liked and who knows only have started supporting the HDD slot of the PS2 instead, and that would make this discussion completely pointless and irrelevant.