AMD = ATI, but anyhow ATI (and I think even nvidia) are already producing graphics chips on an 80nm process.
Chips on TSMC's 80nm process were brought to market in September 2006 with Nvidia's smaller core mobile design.
Xenos is definitely not a small core.
It would have been a dangerous gamble to bet on 80nm years ago. I'd be that if MS had gone 80 nm, we wouldn't see the 360 until 2007.
edit:
ATI was even later than Nvidia, based on a well-established design no less. It would have been really down to the wire for a 2006 release of a new GPU architecture in any quantity.