Like a lot of people, I'm going to take this with a big grain of salt although there is a good chance that "sources close to the project" may well be right in this instance.
From a business standpoint, sure; it makes a lot more sense to design an all new console that can be produced cheaply and more importantly, sold at a profit from day 1 (Nintendo business 101).
That said, a console based around a HD 6670 GPU would have to be a $299 MSRP console, and by that I don't mean shipped with HDD optional (as in none like the Xbox 360 Arcade/Core). While the card may retail for about $80, the GPU itself is probably a $40 part if that.
And while there's a degree of optimization and modification that could be done with the GPU, make no question; it is an entry level GPU. You're not going to see a 100% or even 50% better performance jump over a retail HD 6670 VGA card.
So, if this early rumor is to believed, then MS' strategy for their next console may well be to focus on Kinect 2.0 (which I'm personally more interested in than the box it will be sold with), and presumably more games for the expanded market under the "gaming for the whole family" approach that worked so well for Nintendo and the Wii. At the same time, it will function as a network media center, focusing on services and streaming media more so than just games themselves.
Those who are already fully invested in XBL as their primary gaming go-to platform will learn to love it even if this approach means fewer platform exclusives in line with Halo and GoW as all major 3rd party developers will still publish their games on the Xbox.
Personally, I'm a little disappointed by the choice in GPU. Okay, I'm a lot disappointed, even if I understand the reasoning behind the decision, assuming the rumor is even true.
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