Pricing was not necessarily the reason the Saturn failed while the PS1 succeeded. One of the major reasons the Saturn died was because it was built to play the games that were most popular at the time it was being developed -- 2D fighters and sidescrollers. The Saturn was awesome at 2D graphics, actually better than the PS1 because of the memory configuration. However, the archetecture wasn't built to handle the kind of 3D gaming that the PS1 could. Shortly after both consoles debuted, 3D gaming became the big thing and the Saturn wasn't able to provde gamers with the types of games they wanted.
of course, there's a marketing issue too, which seems to have recurred for Sega later on.
As far as consoles turning into PC's, eventually that will probably happen, and it won't be limited to a console. It's likely that all home entertainment will eventually revolve around a box, so that one box could hav PC, game, TV, video, audio, and other functionality. The only real barrier I see to this is the state of console gaming with multiple companies producing competing consoles. While that competition exists, I expect consoles to stay fairly true to their roots, even though they will obviously gain PC-like functionality such as hard drive support. I don't expect to see a console that comes with a keyboard and mouse anytime soon.