I've given it some thought, and i've come up with the solution I do think MS will end up pursuing for this. This is my prediction anyway.
For starters, from my dev perspective, I just can't foresee how they go about fulfilling the promises they currently have while also maintaining it being a 'console'. Theres no way they'd garner the 3rd party support to support all of those machines, not to mention they couldn't build up a marketshare large enough to generate profit on any individual release within a reasonable timeframe, especially if this were a yearly or biannual release.
So, the solution I see is MS turning Xbox into a sort of living room PC box, a la steambox, and have it be an open-ended OS, rather than the closed OS that we currently get with the X1's version of Win10. Again, this would mean that they will have completely moved away from the traditional console platform, while still getting to sell a piece of hardware called 'Xbox' that consumers of their entertainment software could enjoy. I imagine the OS would be revised in some ways, but that it would be way more open than the current X1 OS is.
The benefit of turning your closed box console into an open-ended OS is that, you get to reap the benefits of having your machine be PC like. Depending on how they implement their new Xbox's OS, they could allow installation of non-UWP apps as well, allowing something like Steam on the box, which would really draw in some fans. You'd even be able to license Xbox to other hardware manufacturers and allow them to make their very own Xbox with different specs. At that point, its up to the user as to whether or not your machine could run any particular piece of software. This solves the development problem we have spent time discussing, as it would just run the PC version of games, which have code-bases which are targeted towards hardware manufacturers, and not specialized in the console's APU.
The success of this will depend on one thing: can MS get out of its own way to allow this to be successful? If they launch this box, but make the app-environment closed off, thus not allowing you to install Steam or Origin, and forcing you to only use the Windows Store, then the box will only ever be as supported as UWP gets (which as of right now, I don't see getting any more support than Origin does in terms of 3rd party releases). If the W10 Xbox OS is open-ended, allowing me to install most/any app I want, then not only do I have access to my Steam software library (and licenses on any other service I use), but all of it will carry forward onto any other device I use. But again, this relies on MS doing something MS has, in the past, proven incapable of doing.
