I focused on the cost/performance, as every console manufacturer does. About the timeline and brand image, well, anything is better than what they have now, and they certainly would market the heck out of it.
Can you stop with that Dreamcast crap, please? That's simply not comparable. If you want to compare, then take a console who launched early, were comparatively weaker and didn't got pulled out after a year or so, like Megadrive/Genesis, Saturn, or Wii U. And as you can see with the inclusion of the Megadrive/Genesis, that's no guarantee to be a flop.
Yes, they are talking about bringing their games to PS4. But that was more or less the plan all along: Originally, the Xbox was created to promote PC gaming, and more specifically, DirectX (which is exclusively on Windows as opposed to OpenGL), hence the name of the console. Don't forget Microsoft is a software company, and only got into hardware with Xbox. What they wanted is to sell software through Xbox - but it turns out, that they don't necessarily need their console to sell the software.
In fact, since you kept talking about Dreamcast, I expect them to pull a Dreamcast in the way that Microsoft is going to stop their console division and simply becomes a software publisher again. However, unlike the Dreamcast, sales or financial losses will have nothing to do with that decision - just that it's not necessary anymore for their plans.
Would you prefer the PS2 instead? Are we going to assume it would have turned out more like that?
PS wanted to have cross play with the 360 and MS told them to get bent. I wonder why when PS was willing to hand XB exactly what they wanted, they rejected it, only to then pay for it with XB1, then implemented cross play, and had to seriously push to get PS to join, in the most minor partial way possible. Maybe just maybe, when MS was selling enough consoles, they were going to remain headed in that direction, until they got stomped by PS4. Then just by chance, they decided they would take another direction with much less solidified competition where they could more easily get their foot in the door. Now they want to put their first party games on the largest solidified console platform? Sounds a lot like someone doesn't think they can sell enough consoles to make it worth their while, like another ghost of console past.
So because MS saw the potential downside to selling consoles in the future, partially because of what has happened to other consoles in the past, they changed their direction, and that makes it completely different than Sega? I agree it won't be identical to how things ended for DC, but it would certainly have similarities. It's not like Sega could have done what XB is doing to change direction, and it's not like MS is looking to offer games on other platforms like Sega does.
The Canadian National Anthem According To Justin Trudeau