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slowmo said:
I would be shocked if they go this route as i doubt the memory footprint for windows 8 would be suited for a console. i would imagine they might use a vastly modified and optimised kernel based on windows 8 at best.

I agree, but it'll likely still use the same kernel, which is basically what this article is proposing if not confirming.  The Xbox 360 ran on a heavily modified version of Windows XP Embedded, if I'm not mistaken, and the original Xbox ran on divergent version of Windows NT specifically created for the console.

As others have said before, it seems fairly understandable that Windows 8 would be the basis for the next Xbox's OS.