I think this drop is plausible and in fact necessary. Look at what Sony's now has to deal with:

A) HD DVD is on its death throws, but the hardware is now down to $149 MSRP. That means that not only will people be picking up HD DVD players to use as upconverters, it also means that more and more companies will be manufacturing BD players in direct competition to the PS3.

B) Basic, upconverting DVD players are anywhere from $59 to $129.

C) PS3 is still the best Blu-ray player for the vast majority of people, but currently the cheapest PS3 is $399, which is way out of the budget for most people.

When faced with either a $399 PS3 or $59-99 basic upconverting DVD player, the PS3 is going to lose to upscaling DVD players in the mass market. Once competitors start making BD players en masse, the PS3 is going to most likely lose on that front as well.

If Sony really wants to take advantage of shortages of the Wii and XB360 and sell to the apathetic who will stick to upconverting DVD players because of the significantly low price, they have no choice. They need to drop the price on the PS3 now or else a price drop later might not matter except to the gaming community, which is significantly smaller than Joe Q. Public.