Aha! Something I can actually comment on in the 3d technology forum!
Oh happy day!
The tensilica processor is essentially a modern RISC processor that is pretty typical RISC.
It can have a DSP add-on that includes the typical DSP functions: automodulo addressing, address wrap around, bit reverse addressing for FFTs, single cycle MAC, etc.
In many ways it's equivalent to the latest ARM processor. I think the Xtensa is a little more modern and built from scratch, rather than the ARMs evolutionary growth from the original ARM1, however.
The real mojo of Tensilica is their ASIC development environment. They have a way of having the ASIC designer be able to build custom instructions that are fully pipelined and integrated into the ALU, covered by test vectors, and supported by the compiler as intrinsics by just writing some pseudocode. These instructions can operate on as many registers as it wants (and you can feed data into a pipeline, etc), and the instruction itself can have internal state, etc.
Tensilica bills the processor as the "Application specific processor". The idea is to write the application and/or algorithm, profile it, then optimize the hot spots and replace that algorithm with their ASIC instruction.
While it claims to be reconfigurable, its reconfigurable only in the sense that the tensilica core is reconfigurable, but the ASIC designers core isn't. When the ASIC designer is happy with their design (including extension instructions), they press the 'make me a processor button' and tensilica gives them back a core thats written in stone (or silicon)
It works wonders for bit manipulative algorithms like jpeg encode/decode, or bitstuffing, etc. They clean up on the EEMBC test suite for full on optimization because they can take all sorts of complex bit manipulations and condense it down to a single instruction.
HOWEVER, from my limited knowledge of fragment processing, such a thing wouldn't be the shiznit for such tasks, as the processor is too big for such a task, and isn't parallelized enough, nor VLSI enough.
So, my vote is "no use in a graphics add in chip"
Next, does it have use in a hand held/PDA product? Seeing the "vast" array of processors used in the PDA arena, my vote is no. PocketPC has settled on ARM as the processor of choice, and Xtensa isn't ARM, so you'd have to recompile all the applications, etc. Its the same reason you don't see MIPs or SH-x based pocketPCs: the platform has been standardized.
MCP replacement? I dunno. Its possible, though I question why you'd go that distance when there's other DSPs out there for the purpose of encoding multichannel audio into AC-3.
Next, set top box. Here's where my spidey senses tingle. Currently they (ATI) have a MIPS based product used in the RokuLabs HD1000 (among others) set top box. MIPS is expensive, and doesn't offer the same flexibility and customizability as Tensilica. This would be perfect for accellerating MPEG-4 video, etc, yet still offer a normal processor for running an OS and filesystem on. It doesn't need to be a standard platform, since its not fitting into some microsoft dictated paradigm.
Anyways, thats my take on it.