Yes, the ARM thing doesn't make much sense. Would it have an emulator? But the concept of a cheap stripped down 360 is still interesting. If they go with 2 SKU's for Xbox 3, one DD only and the other with physical capabilities and start filling in the gaps of digital retail games, a DD only 360 would make sense. Still screw these rumors, let's just sit tight until E3.

An early April Fool's Joke.
A tablet form XBox system would be a great idea.

Sounds like a super 360 slim Arcade version that will enable decent enough 360 sales for a few years after the next gen has begun.

It can easily live off of XBLA and third party support alone.

intelligence has nothing to do with your understanding of computing...

Well, didn't Sony basically do this with the PSOne and PS2 Slim? Makes sense from a business perspective, because they obviously aren't going to discontinue the 360 as soon as their next console launches the way they pulled the plug on the original Xbox. This keeps them fresh and relevant with the mass / casual gaming audience that just wants the more mainstream games and Kinect features, and sets them up for introducing the true next box to the core gaming audience sometime in late '13.

if it had Kinect in the box too i could see it being big! however.. it would kill Xbox3 + Kinect2

I could see this happening instead of lowering the price of the current Xbox: introduce a smaller Xbox and discontinue the old one - everybody knows that redesigns sell well (that's how Nintendo makes their money;p)! And 3-4 months later they'll launch the nextbox, that way they won't lose as much money on the nextbox ;)

At first this news made me want to throw my xbox out the window, but what you just suggested would make sense.  I could live with that, as long as the next gen xbox comes out next year.

interesting hmm It would have been a better strategy to release it around the WiiU too steal some of its thunder

If it plays the same Xbox 360 games, then presumably the only thing MS would be stealing away from the Wii U would be the cheap seat market at a $99 price.

That said, as a consumer, I'd be more likely to spend $99 on a second Xbox 360 than $399 on a Wii U ($299 is a different ball of wax though). In Q4 2012 anyway.

For Q4 2013, the most important thing a completely redesigned $99 Xbox 360 (presumably with 4-8GB of flash, no HDD) would represent is MS' continued support of the 360 platform, even with the Xbox 3.0 either on the market or right around the corner.

And would actually be pretty big.