My take on it is Sony has two options:
PLAN A:
Release PS3 in 2007. No question PS3 will be more powerful than xbox 2 in this case -- with the year of extra time Sony has, they would have to be stupid not to be. But xbox 2 will have an insane headstart in this scenario, and with Microsoft pouring it on with the developer support, Sony runs the risk of joining this generation too late.
PLAN B:
Accelerate PS3 development, and cut features and performance so they can ship in Japan Q1 2006, max 6 months after xbox 2. In this scenario, it's unlikely that PS3 will be significantly more powerful than the xbox 2 in the real world, no matter how Sony PR spins the numbers.
Everything I've heard indicates Sony has chosen Plan B at this time because they do not want to give Microsoft too large of a head start -- but things can change.
We'll just have to see what happens.