I've been really wondering about where Microsoft is going with their next console, but I seriously doubt that Natal is going to be the Wiimote to their Wii. Some of those specs above actually fit with my personal expectations, so I doubt they're going to release a console specifically toward the mainstream.

The specs in that quote sound ALMOST decent. Let me break things down:
GPU
-600mhz for a GPU is pretty good. If it's built for 1920x1080 output, it must be pretty respectable. I'm going to guess it's based on the Radeon 4870 at this point. That means on-chip Havok, geometry tesselation, and all that good stuff. Look at AMD's Radeon tech demos to see what to expect.

Processor
-Wrong direction. Unless they're running several background tasks, they're asking for trouble. The 360 has three cores, which is fine, and modern PCs use four. PS3 uses one core to run the XMB at all times, so if Microsoft follows suit that's five cores to use. AMD is talking about moving processing to the GPU, so Microsoft better have a good plan for all that CPU.

RAM
-Are they insane??? RAM is DIRT CHEAP these days! Unless there's a standard DIMM in a user-accessible area, 1gb is a BAD move.

Optical Drive
-DVD for the THIRD time? Even Sega, the bumbling failure of CD systems didn't use the same format on three consoles. Even SD cards or USB media would have been an upgrade, since those can easily hold more than 9gb of data, and their prices are rapidly falling. Unless the DVD drive is for legacy compatibility, they're killing themselves.

Operating System
-Put Windows 7 on it! Simply include a read-only partition with the backup image, and let it replace the PC! I would GLADLY replace my desktop gaming rig with an equivalent gaming console if it were a full-fledged PC. Think about what a standardized machine could do for PC gaming!

Controller
-Screw Natal, make a modular 360 pad. Allow both analog sticks to be swapped for touchpads and trackballs, and you have better FPS and RTS control in the living room.

Case
-Microsoft should not be allowed to design cases anymore. Just get a decent mid-tower case and etch a big X in the window.