I think Microsoft could actually pull it off but they would have to market the device very differently from the Wii and play up the strengths that the 360 has over the Wii (basically Xbox Live and the console's specs).
For example they could try to sell the system to adult male casuals that aren't gamers by bringing back the PC golf simulation game Links and using the horsepower of the 360 to make it a true golf simulator (very realistic graphics and physics). Add in a very strong Xbox Live component (leaderboards, vision camera, voice chat, etc) and it could be enough to bring in people.
They could create a very realistic bowling game and have online leagues and tournaments over Xbox Live. Since the Wii is still lagging far behind in it's online component it simply wouldn't be able to match that kind of game. And this would be the best time for Microsoft to take advantage of that.
Basically what I'm trying to say is that if marketed correctly and with the right games it could carve out a place for itself in the casual space which currently the Wii has for itself.
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