$499 and low specs doesn't make sense. Also some guy from AMD said Avatar like graphics when speaking to xbox magazine.
there's no reasons at all to believe that microsoft will not sell the console at loss, they ever did this from 2001.
As time is passing by, I believe that Infinity will use cloud to help computing to compute 3d graphics, microsoft servers+ seti@home style with consoles that are not playing (but always on, alway connected)
if 10% of the whole sales are playing in a moment, each console should have 10x the specs, 10,2 TFs and I'm not considering microsoft servers (similar to nvidia cloud 3d servers), maybe those servers have tons of AMD racks built in, so the 10 TF per console can be even low.
Anyway 5 TF per console should be trivial to obtain.
Xbox Infinity 1.2 TF sold at 349$
Xbox Infinity 5+ TF cloud Service and Live Gold (2 years) 499$ or 349$+ 15$ every months
can move engines feed rapidly the GPU with data from internet?