Go buy the book "The Xbox 360 Uncloaked"....i really think the insight story of microsoft xbox to xb360 development will help your project.

If you read "The Xbox 360 Uncloaked", microsoft actually thought about doing so by removing the royalty fee but in reality, it will never work because in the console business you already selling the hardware at a loss...you need this royalty fee, otherwise you got no profit at all.