Are you suggesting this revision would theoretically carry Microsoft for another 5 years or whatever?
I think it has some merit, but I believe there are a few challenges:
1. The hardware needs to be reliable, MS's reputation in this arena is already low and I think releasing another "rush job" console that breaks down could be suicide.
2. Pricing may need to be aggressive. I don't know if MS can develop new hardware that people will pay $400 for given the coming plateau in graphical fidelity. Depends on the accompanying software.
I'm also still very skeptical about Natal. It sounds great, but I need to see real people playing real games on the hardware.