I remember reading that there was some kind of fallout between ms and nvidia over pricing of the gpu's after a few years (didn't come down in cost to what it was meant to or something like that), apparently one of the reasons they went amd for the 360.
Nviia didn't make much profit form the original Xbox deal by accepting small profit margins. Their future offers to Xbox had a healthier profit margin, MS went with the cheapest viable solution. AMD was definitely more desperate to get the revenue even if profit margins were non-existent.