It really boils down to the issue of cost.
If MS can do a redesigned unit that's smaller and has fewer components and uses less materials, they can produce them for less and increase their margins. Plus it would be smaller, lighter, could be shipped in a smaller box, making it cheaper to send through distro channels as well as being able to store and shelf more at retail.
Sounds like a good idea to me.
If such a redesigned unit could be marketed as a "new" console, presumably along with the Natal launch, then I really don't see why not.
I would personally buy one.
Plus, isn't there a chipset redesign in the works to integrate the CPU and GPU on one die? That right there would reduce costs in addition to allowing it to be mounted on a much smaller motherboard.
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