That's an internal Blu-ray RECORDER, not just a player (hence the high pricetag).

http://av.watch.impress.co.jp/docs/20081015/sharp1.htm

The anime industry might still be "struggling to pump out a healthy amount of BD titles" in the US, but by the end of the year Bandai Visual will have released more discs in Japan than most of the major studios have in the US (I didn't do an exact count but glancing at the number of releases per studio I believe only Sony and Warner will have them beat). Some of those are TV series volumes, but they're still have a great lineup, especially this year with a good bit of vintage classics such as Bubblegum Crisis and Z Gundam coming out. And with the first Blu-ray volume of Macross F outselling the DVD showing Blu-ray's increasing popularity among anime fans in Japan, more and more titles are sure to come.

See here for more info: http://www.mania.com/aodvb/forumdisplay.php?f=43

Where does it say that they're stopping work on the technologies required to bring production costs down?

I beleive the last Fox release was actually Night at the Museum, which was just released on April 24th.

"Maybe why hd-dvd recorder set top boxes are dead in Japan is because they sell for $3500"

Not just HD-DVD recorders, but the standalone players as well:
No.1 Panasonic DMR-BW200 56.7％ - Recorder
No.2 Sony BDZ-V9 28.3％ - Recorder
No.3 Panasonic DMR-BW100 7.0％ - Recorder
No.4 Toshiba HD-XF2 2.9％ - Player
No.5 Sony BDZ-V7 2.7％ - Recorder
No.6 Toshiba RD-A1 1.5％ - Recorder
No.7 Toshiba HD-XA2 0.6％ - Player
No.8 Toshiba HD-XA1 0.3％ - Player

Toshiba isn't even bothering with the HD-DVD market in Japan anymore. The top selling BD players outside of the PS3 are all BD recorders as well. If Toshiba thought they could get enough people to adopt HD-DVD with these recorders they would risk the extra cost, but HD-DVD is already dead over there so there's no point.