There is nothing wrong with the PowerPC architecture, and the PowerPC 970MP (a dual core PowerPC processor) was used in the Mac Books and Mac Mini in 2004/2005 running at 1.5GHz to (IIRC) 2.5 GHz ...
With that in mind, I suspect that AMD sees a potential CPU/GPU hybrid as being very popular for low cost laptops and ultra-small and/or inexpensive PCs. At the same time, I'm sure all console manufacturers are looking at how physics APIs are starting to take advantage of the massively parallel architecture of the GPU and could see some benefit of that kind of parallelism being moved towards the CPU. While the console manufacturer and AMD may not want the exact same product at the end, there is a lot of similarity between their goals and AMD may have been fairly agressive in targeting a console manufacturer (possibly offering lower licencing fees or what not than IBM was willing to) in order to get the R&D money to build the groundwork for the product they hope to produce.
