Xbox 360 is not going down hill. Only a small percentage of Xbox users were affected by the XBL update. An even smaller amount of users had errors caused by G.R.A.W.. Even more, Microsoft is fixing the broken or error-ridden consoles for free and without any cost of shipping for you. You also have a year long warranty with Microsoft even without purchasing a store warranty.
Xbox 360 is still a top console and is going to wreck the PS3 in sales as well as games and overall content. Those who wait for PS3 will be supremely dissapointed with the outcome.
Me? Well I just can't wait to play Halo 3 on my godly console as PS3 users complain about the first shipment of consoles.