ColoradoHoudini, from my experiences with both machines, it's more or less a sum of everything. Again this is just my personal experience, but Xbox Live/Online/Store has been much easier to use and more stable. Performance wise on cross platform games can vary, and in general the 360 has had more solid performance, and does not require any sort of mandatory install with exception of a few games. Madden 09 for performance and Burnout Paradise for Hard Drive issues.
Plus there has been a better overall catalog for the 360, along with the unit cost.
But overall I think what's hurting PS3 sales the most is still the overall cost of the machine. Everyone is more or less waiting for a PS3 price drop, and if you can play the vast majority of the games out on a 360 (and the unit is cheaper) why get a PS3?
As for the reason not to drop the cost of the PS3... my guess is Sony overall is trying to get all the cost back for the PS3 development and Blu-Ray drives, along with manufacturing cost's back before they do so.