So I expect that at one or both consoles will use a small fast SSD cache in a tiered memory configuration with a HDD. A 128GB SSD + 1TB "elite" console launched alongside a 64GB-only "Arcade/streaming" edition (which ultimately knee-caps performance for the entire generation) seems like exactly the kind of thing Microsoft would do.
While a lower capacity "streaming" version will likely be happening in some form, giving the full version a 1TB hard drive plus 128GB SSD might not be all that cost effective when 1TB SSDs are already available for around $100, and could be significantly less by the time these consoles launch. They probably wouldn't be saving much, if anything, by going that route unless they targeted a higher capacity for the hard drive. The price floor for mechanical hard drives is higher than that of SSDs, so it likely won't be long until they lose their price advantage at lower capacities.
A big part of why Sony dominated this generation because their overall user experience (controller included) is cleaner, faster, and more polished.
I don't think that really would have much to do with it at all. People don't buy a console for its menus, and most seem to prefer the less-symmetrical layout of Xbox controllers.
I think it's more down to there having been a questionable marketing focus around the launch of the Xbox One, as Microsoft was putting too much focus on the non-gaming aspects of the device. One big thing they initially tried to do different, making DRM work more like we see on PCs, received a lot of negative press and the idea was canned before the device even launched. The other big thing they initially did different was the inclusion of an improved Kinect sensor, which while interesting, added significantly to the console's cost without doing much for core gaming. Most notably, the Xbox One initially cost $100 more than the PS4, despite offering lower hardware specs. This higher cost for less performance undoubtedly killed more of the initial hype for the device than anything else, and gave Sony a chance to gain significant momentum.
And of course, another big thing affecting sales of the console would be its exclusives, or lack thereof. The Xbox One simply doesn't have many games that I would consider to be system-sellers that are not also available on the PS4. Maybe Halo 5 and Gears of War 4 were, though those saw a weaker reception than most prior installments in their respective series. And there's Forza, though I'm not sure that's a series many would buy the console for. Compared to Sony, they don't have many console exclusives, let alone ones that are especially well-received.
That being said, they have still moved a decent number of consoles, with about half as many Xbox Ones sold worldwide as PS4s, and the numbers are much closer in North America. It might not have been like the previous generation where the PS3 and Xbox 360 more or less tied in terms of worldwide sales, but it's still much closer than it was with the first-generation Xbox.
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