You know what would be a great ad this holiday season?
iPod vs XBox360
"Why get your kids an XBox360, when you can get them an iPod nano?"
"Half the price, 100x more portable"
"Share the experience of music with your kids, leave the video games at the arcade"
All the kids that want an XBox360 want an iPod, too. Apple just has to convince the parents that an iPod is a better buy.
Maybe these two products aren't exactly in the same category, but when you're thinking about holidays, every (reasonable well-off) kid gets one big present, regardless of category. Will it be an apple or a MS product?
Apple would be smart to address this.