Xbox 360 Fanboy, citing "a tip from a source close to Microsoft's marketing department", says the price cut to $US 199 for the Arcade system is meant to position that bundle against the Wii. So it'll get a huge family-friendly marketing push and title support. And in the fall, it gets a motion controller with some motion-controlled mini-games developed by Rare.
Again, according to this rumour (by the time I'm repeating it to you, it's fourth-hand) the controller will be sold separately and will be compatible with all versions of the 360 console. Reading the story, it sounds like you would get the controller plus an even larger list of mini-games if you buy it separately.
The new products are set to drop Holiday 2008, says Xbox 360 Fanboy. We shall see.
Rumour: New $US 199 360 SKU With Motion Controller [Xbox 360 Fanboy]