The xbox division wasn't 4 billion(!) dollars in the hole for nothing:
R&D costs money - even if you're just recycling standard components. these days it's often cheaper to buy a new printer with ink than to buy just a refill cartridge
And exactly how much do you think it costs to make a inkjet printer these days? Refill cartridges being more expensive have nothing to do with production costs, and everything to do with market value. Consoles are no different: A company can afford to lose money on the initial hardware sales, and make it back (and then some) over the long run by selling accessories, licencing fees, etc.
Except they can't because their mayor concern is getting money into the shareholders accounts. By selling the xbox at an artificially low price, they are also forcing the competing consoles to sell near the same price point
But they aren't selling it at an artificial low price. You could buy each of the components in the XBox 360 off-the-shelf for close to what the XBox 360 costs. Ofcourse Microsoft are getting bulk discounts, because they can order several million units in one go, so are getting much cheaper prices than what you or me would have to pay for it, and besides which, they aren't buying retail in the first place. If it takes microsoft 20 billion in subsidized xboxes over the next decade so they can effectively run the playstation and nintendo off the market and get a monopoly there as well, you can bet that they would go for it.
I'm not saying they wouldn't. I'm saying they wouldn't do it at a loss, unless they absolutely had too, and they don't. You want to see a good example of what happens to companies who subscribe to your train of thought? Visit SEGA and ask them about their new consoles. Ooops. I forgot. They don't do that anymore.You cannot run a business on losses - and in the case of Microsoft you cannot use your exsisting monopoly, or money gained from it, to fund expansion into new markets, unless you want to be on the recieving end of a US DoJ anti-trust lawsuit. And I doubt they'll want that. Again.