I agree with the player pricing model
Your hardware point is possible for Toshiba players, since they make players and have the most to gain from winning out over BD. As far as movies, Toshiba doesn't make any and there is no incentive for the studios to lose money (or make less) in order to give HD-DVD a boost. They don't care which format wins.
In fact if Toshiba was able to produce and distribute a $200 player there would be no need to cut movie prices. Average consumers would consider buying the players to "future proof" themselves, even if they didn't have a HD television.
Would that be enough to win the war? Who knows, but it couldn't hurt.