It still wouldn't be cheapening out on hardware, just less transistors spent on GPU since their aim is to have strong entertainment box too, and you need stronger CPU and more RAM to do that. Than again, we still don't know for fact what they are shooting for, but if that rumor from GAF guy who has good friend working at AMD is anything to go by, than maybe MS isn't cheapening on GPU at all.
He said Sony switched to Jaguar cores, BG if I remember correctly wasn't aware of that at the time, but now seems to think thats the case. That would put some credibility to the rumor I would think.
If they want to make a profit on day one or closer to that then it would mean cheapening out on hardware is true, they may get a generational leap but they are not getting nearly as much of a leap as they could if going the taking a loss route. But I guess in the grand scheme of things that really doesn't matter as long as the leap is significant enough.
I'm also waiting on more leaks from the latest dev kits, keep up the good work bgassassin.