If they do as you laid out, the PS4 will do terrible.

Launching at $500+ again is suicide.

I agree, its a huge risk to release at 500 bucks, its still 100 bucks cheaper then what PS3 was. Today people are willing to shelve out +500 bucks for smartphones and tablets.

there will be no cell2 - why should ibm develop it? and why would sony use it? they give a damn about backwards compatibility. to program it is a mess. no, next time sony will bring on hardware which is easy to develop on, done. and this automatically excludes cell.

second, sure the cell still exists. toshiba uses it in their highly expensive entertainmend hardware. but this has nothing to do with a ps4.

third, *you* talked about cheap ram atm. but looking at console architecture it differs a lot from standard pc architecture (unified ram with xbox, extreme high bandwidths at ps3's architecture). designing a console is not "i pick some of these and some of those, stir it and *kaboom*, another console". especially consoles are highly optimized in one or another way, even single components (especially the gpus).

by now, no one can make good guesses on details on the hardware, except:

cpu: most probably x86 or ibm p7-like

ram: definitely more than ps3 and x360. type of ram totally unclear.

gpu: nvidia OR amd. no other option left, specs are speculations.

storage: who cares anyway.

odd: most probably bluray.

controller: well, i think it will look a lot like a dual-shock.

done.

I will post what I have posted in a previous PS4 specs-thread (I've changed it slightly) but this time include my predicted price:

I think it'll use some sort of Cell. The libraries and knowledge is there at the moment for the current makeup...its taken time but they are finally there. You've seen what the machine can do now. Going further with Cell should not be a problem for the devs that already developped for the PS3. This means PS4 will be backwards compatible too with PS3 games. A lot of people will be angry if PS4 won't run PS3 games.

Plausible specs, atleast better than what we heard before E3:

Gaikai will provide PS4 backwards compatibility for PS3 games.

PS4 will have 10GB of XDR2 memory

PS4 will have AMD APU

PS4 will have an HD6600 (meaning it will be less powerful then WiiU)

The specs I listed are also very similar to the more recent rumour (post E3), making me even more confident in it. 

I want sony to release the PS4 at 599$ basic model and with extended HDD 699$.
You know why?
First, i want the graphical jump to be as high as possible.
Second, i want to play games for the next 7-8 years on this very same console.

Do a weak and cheap PS4 and the games won't be able to catch up with PC games for longer than 4, 5 years.

It needs to be THE machine on the market. full hd 3d resolution and massive graphx.

Currently, all the rumours point to an AMD APU and AMD GPU with 2-4Gb of RAM. The 7870 GPU would be great but it would require too much power to be truly viable in a console.

Personally, I don't think they'll go the APU route, but they may stick to an AMD CPU:

CPU: 6-8 core AMD CPU (Next gen Bulldozer) @ 3.6 GHz (28nm process)
GPU: Equivalent to an AMD 7850 (28nm process)
I strongly suspect they'll then try to get these into APU form by the 2nd year of release to reduce costs.
RAM: 2Gb is minimum. If devs get their way then 4 Gb.
HDD: 320+Gb 2.5" laptop HDD

Sony bought Toshibas Cell plant for 600m 2 years ago

http://www.engadget.com/2010/12/22/sony-buys-back-toshibas-cell-plant-for-50-billion-yen-makes-a/

For them to opt for AMD would be strange dontcha think?