I am dumbfounded how anyone can think this would be "great" for the games industry. I am personally of the opinion that it would be absolutely terrible. Sure, there's a definite upside: no more console exclusivity, no more split userbases, arguably greater maxing out of the power of each console. But the downsides are massive.
With the loss of competition, console features would stagnate. Think of all the great, innovative features we are getting this gen: wireless standard out-of-the-box, new motion sensing control schemes (e.g. Wii/Sixaxis), HD movie playback (PS3/360), AV capabilities (e.g. photos, music), online capabilities, custom soundtracks (360), etc. There are more, too; the list goes on and on.
In addition, with a single, dominant console, there's very little incentive to come out with a new console - unless you have a significant competitor breathing down your neck. For example, if there were no Wii or 360, how long do you think Sony would have milked the PS2? A long, long, long time - I mean, it's still doing great now even with all the next-gen offerings out there.
Competition causes these console makers to try to innovate to differentiate themselves, then match each others features to achieve parity, and also to offer maximum value in their offerings to undercut each other. All of these are great wins for the consumer. The advantage of a unified userbase does not even come close to negating that. Would prefer to still be playing a PS2 on your HD set? Or how about playing all your games on $75 Nintendo-sanctioned cartridges? Just a few examples, of many, of what console competition has brought us...
You'd be talking a 10 year lifecycle with this box (or until there was some reason that it needed an upgrade like DVD and HDTVs), but how much do you think graphics are going to matter then? Unless there is a drastic change in the way content is created, seriously drastic, hardware power isn't going to matter as much (especially with successes like Wii/DS proving that it's already marginalized) -- we're going to hit a ceiling of financial investment vs content output that just won't make the mentality of maxing out the hardware practical.
The problem with most of those things you mention is they have little impact upon the core reason people buy consoles... the actual games; the content! Those differences only exist to get you to buy the stuff in the first place and have little actual impact upon the actual experience while playing the game. Maybe I'm the only one, but if all my game box did was play every single game released, I'd be pretty damn pleased!
It's going to turn into the movie industry sooner or later in that respect, where the content on the disc matters, rather than what disc it's on -- the medium type should be irrelevant and as long as a spec is made with enough future proofing too. Look at the HD DVD/BR specs -- they put in a lot of extra room in BD-J and HDi for interesting things to come and I'm not sure why you don't think they wouldn't in something like this.
Also, there is nothing that says something like an Eyetoy or Wiimote couldn't be created mid way through -- accessories like that could be easily added to the spec as they don't change the core spec, only add to it, optionally. There is plenty of room for continued innovation throughout the devices lifespan. The companies would still be competing to bring you content -- your dollar is still fought over.
I guess I don't see these continued "innovations" as all that important to the end experience of me picking up a controller and playing the game I bought. They are novelties at best and mostly just continuations of previous ideas or taken directly from the PC world (which means when making this theoretical box you'd have them borrowing ideas and improving them still, so it isn't like this box would be a console that only played games and nothing more). Wireless controllers was the next step, Online play was an obvious next step, media playback has been there ever since disc based media was used because it was easy to add, other features (picture viewers, web browsers, etc.) are all slowly evolved over time (mostly from the PC).
Even in the DVD world, DVD player features aren't quite stagnant (even in a old format that was created around '95) -- we have some that play SACDs/DVD-As, some that play Divx movies, some that will record stuff, some that are fantastic upscalers, etc. There is still going to be competition, because you'll have half a dozen or more manufacturers trying to vie for your dollar. There'd be a lot more room to play in something like a game console than a DVD player.
And yes, if PS3, for example, had every game exclusively for the next 10 years, I'd be happy as could be. Hell, even if PS2 had all the games exclusively made for it for the next 5 years, I'd still be happy (and PS2 has almost no extra features, but it plays games!).
There are benefits to console competition, but they certainly don't outweigh the benefits of a single platform like you say! Unless... you buy consoles merely for playing in the GUI and not playing games?
