If the part about not playing used games is true then it would mean some big changes. how would companies like, Gamefly rent out games, because all their games would be considered "used", unless they were given special copies that could be used on multiple consoles.
Having a console that couldn't play used games would be an interesting financial strategy, but I could see it creating a lot of headaches.
I'm not so sure how I feel about the smaller controller. The reason I like the Xbox 360 controller better than PS3 is that it fits my hands much better. If true I'm sure they would allow use of Xbox 360 controlers, because too many gamers like the feel of it too much.