Well, as a content 360 owner who has a friend who owns a PS3, I can say with some certainty that 360 is the better deal. Even the high end model, the elite, is still over $100 cheaper than the high end PS3 model. As for hardware failures, every 360 now has a 3 year warranty, meaning even if you don't get one of the first models you can still get it fixed for free.
In terms of games, 360 already has a great lineup with exclusive games like Gears of War, Dead Rising, Lost Planet, Prey, and Bioshock. Those games it shares with the PS3 generally look and play better on the 360, and have exclusive content to boot. That snags you another two games in Darkness and Oblivion.
Now you might argue that the price of the PS3 is because of the next generation disc player, but in all honesty, are you looking to play games or watch high definition movies? In addition, assuming Blue-ray one day wins out over HD, MS will just release a blue ray player add on as they've done with the HD player. With a PS3, I always got the feeling you're being forced to buy something you may not actually want. With the 360, there's a bit more flexibility.
In addition, not all PS1 games are backwards compatible with the PS3, just as not all X-box games are compatible with the 360. Also, many of the so called 'good' PS3 games are mediocre at best. Resistance Fall of Man is frankly boring and borrows the worst elements of Killzone and Call of Duty to create a terrible shooter. Many other 'big' games for PS3 have also received bad reviews, Heavenly Sword, Lair, ect.
A big reason to get a 360 if you have a decent connection is Xbox-Live, which is vastly superior to PS3's online network, but isn't free. The ability to download demos and play with your friends easily is a big selling point, but online play may not be your bag so I put this in as another pro.
Not to mention the great exlusives coming out for 360 in the next year. Ace Combat 6, Eternal Sonata, Dead Rising 2, Lost Planet 2, Mass Effect, Too Human, Gears of War 2, Splinter Cell (whatever the next title is), and more.
I'll sum it up like this. If you want to play good games with great content on a cheaper console but a 360. If you want a blue-ray player, buy a PS3.