Funny, I was looking for the same information recently, and couldn't find much on it, until one friendly dealer showed me the differences.
I currently own BabyLock Grace.. I love it, but the arm lengh is a bit too short, so have to upgrade..
Basic machine between Elizabeth and Melody, apparently, is identical. As gotta-sew wrote, Melody has extra fancy stitches (not too must of a wow-ing factor), and upper/lower case lettering which Elizabeth doesn't (Elizabeth only has upper case letters). since Melody can do lateral stitching, you can program to do offset repeating patterns, and the extra stitch pattern is mainly because of this capability...
Also, with Melody you get one extra foot.. the 1/4" foot.
One other thing that Melody has that Elizabeth doesn't is the basting stitch. it can stitch at some large stitch length, and automatically loosens the bobbin tension, so it's easy to pull the basting stitch out.
Lateral stitch is also very cool. if you do lots of labels and such on a tight space, it can make your life easier since you won't have to turn the fabric around. but for lateral stitch only zigzag and straight stitches are available. so nothing really fancy. but if you do a lot of stitching in a small tube (sleeve of a kid, etc), this can help...
I think Elizabeth is a top seller, while Melody, because of the extra $100-200, sells much less. one dealer said she sells tens of Elizabeths every month, but only sells one Melody a year. another said he sells hundreds of Elizabeths in a year, but 2 Melodies in a year. similar stories. So because of that, you may find better discount on Elizabeths than Melodies, just from the sheer throughput of the sale.
On the other hand, the dealer may try to get rid of their Melody so it doesn't collect dust. YMMV.
I decided to go with Melody (will be getting on in the next week or so. my local dealer is too busy this past week due to the quilting show, and couldn't handle my trade-in/upgrade stuff). getting that extra extension table itself would pay most of difference in cost. but if you're planning on getting a larger Sew Steady extension table, or have a nice sewing furniture with its own cutouts (the Extension table for Melody is about the "junior" size of the SewSteady table) then this may not be much of a plus.