I'm surprised this discussion is still going on, I could understand this in 2007, in 2011 its pretty much an established case.
Let me clarify, one last time:
.IN will beat .CO.IN in pricing for the same keyword / extension for the simple reason that .co.in can ONLY be used in India, whereas .in is and can be used by companies all over the world. More competition = higher prices, economics 101.
.IN is being used by American, British, German, Korean, Japanese, Swiss, Austrian, Vietnamese and more for their primary websites for the simple reason is that they see it as 'in' or 'internet' or 'international' or even 'interactive', among other uses.
In fact I've had german domain investors tell me that if they can't get the .de (first choice) or the .com (second choice) they're quite happy with the .in
Add to that the fact that IN itself is a preposition, a major advantage while brand building or using domain hacks or even subdomain / subdirectory hacks. (movie.admits.in/mumbai)
I usually recommend local clients targeting the Indian market get both, I myself own my top keywords in both extensions as far as possible, but that's for brand protection and little else.
Plus now with the
renewal prices almost at parity ($7 v/s $9) even the most fundamental excuse people use (too expensive - which is nonsense when you're selling domains for $x,xxx) is now redundant.
Top this off w/ zipf's law (shorter is better for linguistic viability) I think we can safely assume the following equation - xyz.in = 10 x xyz.co.in - at least for the purpose of domain investing.