To compare launch consoles, the GameCube was cheaper to manufacture than the original Xbox despite being much smaller. I don't think you can say there's any correlation as far as consoles go.
That's true..but let me ask my question like this.
Both the 360 and PS3 were huge systems when they came out. I'd imagine that MS and Sony didn't want them to be so big and clunky if they could have avoided it, right? If they could have made them smaller at launch, they probably would have, right? So I would then assume they didn't cause doing that would make their systems more costly. Follow me?