The rumor has been debunked by MS, and such a modest upgrade doesn't seem likely.
Would it be the first time that a company like Microsoft flatly denied a rumor that turned out to be true? And if you are referring to the CPU upgrade as modest, I'd respond that it seems to be a natural consequence of their chosen architecture (a GPU-centric design). How much more of a benefit is there going to be with more cores? How much more of a benefit by waiting until 2011? Reduced cost, but then they increase the chances of launching with Sony. Of course 28nm may not be ready by 2011.
2011? For these specs and price? Extremely unlikely. I think Sony is going to play the long term game with MS, since they both took such a beating financially to bring their respective consoles to market. Sony is close to breaking even on console manufacture, they wouldn't want to throw that away so soon. You might say they'll keep supporting the PS3 while they produce the PS4, but can they really get the current PS3 to manufacture under $200 by 2011? I'd expect a slim PS3 in 2009/2010 which could put Sony on the path to a significantly cheaper console.
I also expect a "slim" PS3 soon, probably later this year.
Further, a next generation Cell of that level would be such overkill for a console in 2011, and incredibly expensive to produce. Not to mention being very unbalanced (overpowered) with respect to whatever GPU nvidia can offer in 2011. Also if Sony went with a Larabee powered GPU, there would be even less of a need for so many SPUs. The memory you've listed does seem like a practical amount.
On the face of it, 28nm provides about 10 times more area than 90nm, so assuming that the new cores take up as much area as the old cores (unlikely), we're talking 90 cores from the process shrink. I'm of course assuming what is driving the number of cores for the next Cell to be the following: 1) the scalable design of Cell, 2) the 28nm roadmap, 3) the 8-1 ratio of PPEs to SPEs, 4) the economics of silicon area (keeping somewhat in line with previous generations), and I'm providing a high and low estimate of what is possible under those conditions. I of course have no idea what other problems 28nm might introduce in terms of leakage and heat...
As for the "too many cores" argument, I'd question whether Sony's first-party developers would have trouble figuring out what to do with them. I seem to recall hearing somewhere that Naughty Dog (Uncharted 2) is already approaching the limit with the current Cell. Anyway, if your goal is to produce real-time interactive CG films, say Pixar-quality, how can you say that we have too much processing power?
And I do not see any possible role for Larrabee, unless Sony completely abandons their current architecture and software, and who is going to argue that that would be a prudent course? Larrabee is a new and unproven GPGPU architecture that appears (to me anyway- maybe I'm *completely* wrong, please let me know) to provide considerably less flexibility than Cell.
Neither console will go over 16x speeds on their optical disc drives either, as noise and reliability become an issue. In fact, according to Wikipedia, the maximum theoretical speed for BD is 12x (54MByte/s). With ODD speeds becoming more limited, if they don't move to high speed SSDs, I hope they'll offer a high speed flash scratch space that developers can background stream to.
Taken to heart...
The next Xbox in 2010 (based largely upon a recent rumor pointed out in this thread):
IBM Xenon w/6 cores @ 45nm @ 3.5 Ghz (likely cache size?)
AMD Shader 5 GPU w/32mb EDRAM @ 600 Mhz
1 GB of GDDR5
~100 GB/s bandwidth
32 GB SSD
16x DVD drive?
Natal motion-sensing tech
$300
The next Playstation in 2011:
2 GBs main memory & 1 GB GPU memory (XDR2)
Cell w/32-64 SPEs and 4-8 PPEs @ 28nm @ 3-5 Ghz
100's of GB/s bandwidth
Nvidia-derived GPU
160 GB drive?
12x Blu-ray (can read 200+ GB discs)?
$400?