Sounds more and more like it's just a PC with Xbox logo and backwards compatibility. This thing is designed to kill Xbox and shift the userbase to PC gaming.

Not sure what is confusion at this point. It is pretty clear it will be able to play Xbox, Xbox 360 and Series games… Thisnis what they just confirmed. 

Backward compatibility wasn't the confusing part. The confusion was whether or not Xbox would remain a distinct platform in addition to being a PC.

I think the assumption is the Xbox will run at higher clocks for cpu/gpu as well, along with a wider memory bus (192bit vs 160bit).
Along with more hardware space dedicated to A.I stuff.

If they ran same clock speeds, sure maybe it would only be around ~25%.
The assumption atm is that they wont.

Reguardless I already think PS5 games look fantastic.
How much more power do we really need?

Going for a baseline machine more geared towards elite performance (and pricing), in a time where consumers are becoming more aware of pricing and valuation, and news such as this:

https://www.vgchartz.com/article/465809/ps5-pro-accounts-for-a-low-single-digit-percent-of-total-ps5-sales-in-the-us/

I don't think this is a very good idea, especially while eroding the "Xbox" brand through their own descriptions and lessening focus on actual exclusivity and attached purchasing incentive. Part of what made the 360 competitive was amazing software, many exclusives, even PC releases arrived much later in most cases. There was a lot of incentive to own a 360, even for people who weren't die-hard fans of Halo, Gears of War, or Forza. It showed great breadth and depth, while managing to balance single-player and multiplayer experiences - perhaps its most impressive feat next to surviving the hardware failure debacle.

I'm transported back to the early 2000s, when the Xbox was announced and released. It utilized more or less straight PC-hardware, with focus on brute force, the latter of which was touted as a main selling-point. However, the significantly weaker competition ended up completely shredding the Box in actual sales, mostly due to superior software (but pedigree and brand recognition from past generations played a big role as well, of course) and in spite of lacking things like internal storage or proper online functionality. Heck, the PS2 had an almost identical launch price, making the Xbox by far the better value for money proposition in terms of hardware output vs. cost. 

Right now, I can only see this attempt ending up in shelving the Xbox brand and forcing MS to embrace the broader market as a huge publisher. They somewhat started this whole sequence of events themselves with the incessant Gamepass focus (MS in general have been on a massive subscription craze for years now, to many customers' dismay), trying to maintain platform-unique incentive while also branching out via subscriptions available elsewhere was a poor plan to begin with. On top of it all, the subscription focus created a much tougher developer-environment for medium-to small-sized studios, causing less breadth in software output and effort - going directly counter to the idea and point of buying a bunch of studios and the talent within (which were subsequently fired en masse). 

I think the main strategy going forward will center around "Helix" existing mostly as a hardware alibi to retain some form of brand recognition, while the actual bread-and-butter will be using the massive amounts of IPs under their belt to earn their revenue elsewhere (or anywhere, really). The fact that iconic Xbox IPs have already released on the main rival platform would suggest as much. Furthermore, I think this has been the plan for a long time (since before the huge purchases of publishers and studios began), their utter disinterest in pushing hardware sales this entire generation strengthens that hypothesis for me.

I think they should definitely have an entry level system and I think its too early to rule out that being a possibility. When they first announced series X they didn't talk about S

It's entirely possible, but then why come out with this at the cusp of consumers refusing to pay higher premiums for hardware and machines? I remember the dissatisfaction in the Steam Machine pricing thread, where several users decried "DOA" if it crept over the 800$ mark, not to mention 1000$ plus. This is horrible timing to tout expensive hardware with even less ties to brand identity. Heck; even Apple are doing the opposite with the Neo, and they're probably the guiltiest party in consumer electronics when it comes to fleecing us on hardware and peripheral prices. 

Well they haven't officially come out with anything yet other than the machines existence.

For sure though, their first consumer base will be tech enthusiasts, so I expect them to first try and wow with premium branding, technical prowess and showcases whilst pricing will simply not be a topic until mid 2027. Their first goal is to distinguish themselves from playstation and I think premium will do that better than first talking about the Series S of the next console generation. Dev kits won't go out til next year and that is when we may uncover that there are multiple performance profiles etc. We'll have to see.

Oh, I see. Well, I think we got some clues about that.
During the conference, they hinted to developers to develop Helix games as "PC" games and not target the Series X (or whatever hardware emulation layer they will have for BC), I think, so I would assume they want to avoid having 2 different platforms/OS in the long run; which is really the best world as all they games are de-facto PC compatible (and "Xbox Anywhere", even if this term will not really be relevant in the future).

I mean, having a curated version of the PC OS for gaming with a way to play other stores' games (Steam, Epic, etc...) is very appealing.
For the end user, if they still have the "console" experience (custom UI, one box that can play all games for this generation, shaders already precompiled, no driver updates, nothing, etc., whatever you get from console basically), this can work. Esp. if the specs are there.

I think the price will not be as high as people imagine. I would assume this to be higher than the next PlayStation or the Steam Machine, of course, but not by much.

GabeCube has pretty terrible specs - so unless it's not reasonably priced, it is indeed DOA.

Helix on the other hand will have pretty good specs.