Sounds to me like the 720 will be more of a true "middle ground" console aimed at the iPhone/iPad crowd as much as the hardcore player.
The leaked specs regarding the GPU aren't that mind blowing ... a 1.2 TFLOP GPU is a solid upgrade on the 360 for sure, but not exactly mind blowing.
It'll be able to run a very eye pleasing game of Halo and do PC ports much better justice, but not exactly the 3 TFLOP monster Epic probably wants.
I think there's going to be a lot of focus on Kinect + XBox TV features, this thing is going to be an entertainment box for the living room, games are just one part of it. The next gen Kinect probably also eats up a lot of the hardware budget and requires more CPU cores/RAM to function.
IMO Microsoft is moving away a little bit from seeing Sony as their main competetior to Apple being the main one they have to worry about with Apple's iTV rumored to be coming this year too.
That said, the 720 will still have all the core games that core players want, the CoDs, Halos, Gears, Destinys, Watch Dogs, Metal Gear Solids, etc. of the world will be on it, the broader approach that MS is taking may allow it to sell much faster and appeal to more people honestly, so it may not be a bad play.
