Just some points to note :-
Backwards Compatibility :
Since when was this "Industry Standard"? As far as I'm aware the PS2 is the only console (one could argue GBA I guess) to offer BC. I suppose an argument could be made to suggest that the PS2 makes it industry standard, but I don't buy that.
BC is a nice to have for a feature list, and for more hardcore early-adopters, that said I do think that having the previous systems library of games is a great boon AT LAUNCH, but after that it is less important IMO.
BC could be a double edged sword for both MS AND Sony (who have not yet confirmed BC for PS3 -
http://www.gamedev.net/community/forums/topic.asp?topic_id=271844&whichpage=1�
Kutaragi also confirmed that work is underway to make the PS3 compatible with previous generation PlayStations, but that challenges lie ahead. "[Backwards compatibility] is our desire and it's something we need to take on. We really want to make backwards compatibility happen--we think that's the beauty of the PS," said Kutaragi.
)
IMO Sony must (and probably will have) BC with PS3 - they introduced the concept, and may fall foul if the don't carry it forward.
MS on the other hand has Xbox Live to consider - this is where I see BC as a bit of a minefield for them - Xenon Live? Separate to Xbox Live? How will they play it? With the investment that they have made into Xbox Live, it will be interesting to see what transpires.
Xenon appears to hinge on MS's XNA platform - if this development environment is all it's been made out to be (reduces dev costs, time etc) then they may do well and have a decent launch lineup and second wave - there is only a year till the prospected launch, and if XNA is just a smoke and mirrors buzzword, then they may well suffer next November.
As far as I see it Next Gen, even more so than any before will be about the games, and less about the hardware - the costs & time to create Next Gen games will be greater than this gen all things being equal, both from a technical (multithreading, greater phsysics & AI systems) and artistic (far higher amount of Art assets & resources will be needed) POV.
Judging by the proposed specs of PS3 & Xeneon, unless the developer tools and middleware offset the increased burden of art and tech, then either all that power will be untapped and games won't look much different to Far Cry/Doom 3 hell even Riddick for that matter, or dev times will increase even more and we can all face the inevitable delay after delay.
Just my tuppence worth.