WTF? Do you really know something or is this just a wild guess? Much, much closer to Wii than X360 would mean ~1,5GHz max, are you sure about this? How could this be equal performance wise to Xenon? 8 cores?
The Power7 rumour never made much sense - why would Nintendo, even with a cut down version, spend all that die area on the CPU? The IBM A2, or, given Espressos claim about being a direct descendant of above, a version of the PPC 470, makes a lot more sense. Both have been fabbed using IBMs 45nm SOI.
It could easily be comparable to the Xenon by for instance having more cache, higher IPC through OoO execution, better branch prediction and lower mispredict penalties, faster interconnect to the GPU and a higher performance main memory subsystem.
Even without modification, the PPC 476 PLB6 supports 8-processor systems, and the A2 goes beyond that. Of course, a new design is more flexible. Not that it's needed, a four way design based on either of these cores should definitely be enough to provide performance comparable to the Xenon. Depending on where your bottlenecks are, a two way design could probably be said to do the job. The 476 in particular looks to be a nice foundation for a low cost, well performing CPU.
Edit: The 1Mbit eDRAM macros used in the POWER7 are 0.24mm2 (with a 1.05V supply and 1.7ns/1.35 cycle and access times). That is, 4MByte of eDRAM on the Nintendo CPU, on the same 45nm process, would consume just under 10mm2. Could make sense.