The idea itself has its merits, but it is being poor executed. Not only the price, but the OS could end up being a problem too (Steam Machines actually loses one of steam greatest strengths, their huge library).
That said, Valve is going after the consoles lunch and you can bet they won't stop pushing in that direction. Valve has incorporated one of PC biggest strengths, their adaptability. Just like they dropped the mod sales when it went south, they will drop the OS if they need to. They are obviously operating with good margins, so the price can drop too. Also, they still have PC advantages, like being able to change parts, use older games, apps, multitasking.
At the same time, 2 of the greatest console advantages (local co-op and exclusives) are losing power, not to talk about third partys much more willing to go to PC. It will be interesting to see how it goes.
