I agree with you that the gap in graphics we saw in the last generation which the PS3 seems to still be trying to milk for every dime, will decrease and is no longer the selling point for consoles after the Playstation also released record loses this month.
But when you say that competition will stop diversity, I personally think it's the other way around, competition always seems to drive more diversity and differences, which genrally leads to companies like Nintendo comming up with consoles like the 3DS and WII. Both of which seem to have thrived on competition and used innovation to drive their niche in the industry.
My Knowledge of Project Cafe is fairly limited but if I remember correctly there were rumours of it being quite different, with screens in each of the controllers.. infact a bit like an old console that escapes my mind right now. (It was waaay before my time)
I personally feel that the main drive in the next generation and the main selling point will in be the online non-gaming aspect of each console, PS3 having Netflix kept it going and it's userbase strong in comparison to what seemed like an online domination by the 360 for quite a long time.
My best advice is get a good PC and just laugh in all the console gamers faces as they have to pay for online gaming and for their inferior graphics.
