Microsoft Shifting?

The recent actions of lowering the price on it's "Arcade" console, canceling certain games, and moving towards more casual games.
Games like Your In The Movies, and Lips are the only games with the exception of Fable 2 that Microsoft own game studios are making. The hard core games such as Fallout, and Resident Evil 4 are all be produced by thirds parties. Gears of War which they own is being made by an outside company under Microsoft guidance.
Is Microsoft trying to move in on Nintendo's casual gamers market? Are they eyeing the pick up a play crowd?
Does this mean hardcore gamers will be an after thought in the next generation of consoles.