@iroboto Shifty already did a pretty good job of answering many of the points, but I'll try and do what else I can!
There are a lot of assumptions here for such a thing to happen.
True, but I think there's a fair chance that the core ones are correct: basically same die area, same number of memory chips, lower memory cost at some point, same or lower motherboard complexity [I'd remove HDMI in], no additional dev work, best IQ within its price segment, highest frame rates within its price segment, faster load times, best possible app experience, etc.
So I have an idea of where you are going with this. So I'll try to address what you're getting at. But you're basically saying, build a better XBO with a higher performance profile to replace the aging XBO for a cheaper price. That's the gist of it from what I can tell.
Yeah. MS will need a cheap console until at least a year or two into a 7nm Scorpio shrink, so try to tweak the cost / performance parameters to make the experience of buying one as attractive as possible.
a) The market is still flooded and flooding with older OG XBO and S. Are developers going to profile 3 platforms now? Or will they only still only target 2 platforms?
As Shifty said, it's just the two.
b) When XB2 arrives what will happen to the XBO family of SKUs?
As Shifty said, exactly the same thing that's going to happen anyway.
c) Will they immediately cancel product of 1S SKU? They'll need to call this something else right? How would consumers know which SKU you are buying if they are the same name?
I'd have been planning for a switchover. Handle it in the same way as X1 to X1S - shift manufacturing and sell through the old SKU discounted. Naming and branding would be something indicating a fun, swift, value based alternative to the bruiser of Scorpio. X1Lite, or something to that effect.
d) We know today that 1X has to remove 1/2 its GPU power to run older XBO titles without patch. How would this work on this new SKU? How large of a GPU would it have to be to half it and be able to run compatibility?
You base it on the X1 SoC. Same arrangement, including esram. The SoC works just like it does now, only faster and with modules replaced with enhanced ones where they've been developed (enhanced CPU, enhanced ROPs). No units go to waste. If yields are good enough maybe activate the two redundant CUs. It's still basically the X1.
e) with ESRAM still there, how much of a major advantage are you really going to get over the base model? real estate is still at a premium if esram is present.
You have to plan around esram even if you no longer have it and are just emulating it. So I'm saying keep it, and stick with cheap main memory. Cheapest and fastest route to the most suitable product.
It would still offer huge advantages over the base model. esram bandwidth scales with GPU frequency. With on-chip transfers, this thing will fly. Off chip, you have delta colour compression and DDR4 2666 or the like to eliminate the DDR3 wall.
DDR3 2133 to DDR4 2666 would give a 25% increase in main memory bandwidth, and DCC (up to 40% effective) would increase this further. For games that are hampered by DDR3 bandwidth (e.g. Wolfenstein 2) such a large increase in effective bandwidth would allow even greater filtrate increases than the clock speed increases would indicate e.g. your SoC is 25% faster, but your fillrate is now 35% higher.
Large increases in clockrate and bandwidth (especially main memory) would allow forced 16x ansio - something Scorpio has already proven works exceptionally well.
With stable frame rates and very high IQ, an enhanced X1 would look amazing on 1080p sets. Check out the Digital Foundry comments about X1 games running unpatched on Scorpio. Halo 5! 
f) If they aren't the same name, is this a new generation? They just launched a 1X assuring everyone it wasn't a new generation, so what's happening here?
It's definitely not a new generation. It's the X1 you know and ... perhaps like .... it's just a new revision.
g) Won't new owners of 1S be super pissed off by this?
Maybe some? But having worked in retail I know some people are always pissed off. ¯\_(ツ)_/¯
Its better because it's newer. But it's still an X1, and every sale secures further development for the base X1 and X1S. And it works with all their games and peripherals and accounts so they can upgrade if they want.
h) How quickly would they be able to release such a model? We know it took nearly 4 year of development to release Scorpio.
Don't know. The months (years?) of profiling for Scoprio, and their experience on 16nm means they should already have all the data they need for speccing and starting to simulate the device (I'm sure AMD have lots of data on DDR4 buses). It'd now be a case of modifications to some blocks of the chip, motherboard and power supply.
I'm not proposing anything new not already developed for X1S or X1S (bar DDR4). Re-purposed IP, same software, same BC, same IQ tweaks, same manufacturing process ....
Two years? Starting from last summer?
i) Would they be able to release this product before next gen hits?
Hopefully! But when next gen hits, you'll still need that < $200 device. And by god, I hope it'll have stable frame rates and aniso filtering ....
If you can answer these with strong points, perhaps the product is coming.
I hope it is!
There are many companies that many thought were 'too big' to fail. Having a leadership team that knows when to cut losses, and move on is what keeps companies alive for the next round. When the round is lost, retreat is the best option, otherwise you are just throwing resources away for the hell of it.
If you are honest with yourself and ask what type of company MS is, and how it has endured so many changes, and so many failures and yet, still be up there. What do you really think MS would do in this situation, continue to fight the 2013 Gen? Or move the battleground to next gen?
I think MS need to attack the entire concept of generations. One game library, on a constantly evolving platform that always exists at high and low hardware price points.
The can still piggyback off the hype of a competitors next gen by offering something as capable. Then they can release something better two or three years later.
