IBM has three known Power Architecture cores in current development: A2 (PowerEN and BlueGene/Q), POWER7 and PowerPC 470 (PPC 476 embedded SoC cores). The first two are high frequency 32/64-bit multithreaded cores, the latter is low power/frequency 32-bit. All three cores are designed for multicore, integrated memory controllers, custom accelerators and all have been known to work with eDRAM. A2 and 470 is designed to be highly customizable and are readily available for licensing.
All three are Power Architecture cores. A2 and POWER7 use Power ISA 2.06, PPC 470 use v.2.05. These are both is modern Power Architecture instruction set (Not "POWER", IBM abandoned the POWER ISA more than a decade ago to go all in on PowerPC, which was later renamed Power Architecture), and migrating from GameCube/Wii to Wii U should be trivial. It's the same basic instruction set, just instructions added. It would be like migrating from a Pentium II to a Core i7.
The Wii U processor won't be of the same direct lineage as Gekko and Broadway since IBM discontinued development of PPC 750 (G3) cores after the Broadway (in Wii), but that would matter little for the basic instruction set. All other modern Power Architecture cores are substantially more efficient than PPC 750.
My take on it is that if Wii U is 64-bit, it's based on A2. If it remains 32-bit, it's based on PowerPC 476. My money is on the former. It won't be based on POWER7 since A2 is a much better fit if you want a high frequency, high performance, customizable, multithreaded, multicore, embeddable, 64-bit Power Architecture core. Refitting the POWER7 core to essentially be a A2 core would be strange when the A2 already exists.
That said. Nintendo and IBM could be sitting on an entirely new custom Power Architecture core, previously unknown. They certainly have had the time to develop one. But that seems implausible since Nintendo previously have been using what's essentially off the shelf parts with minor customization.
The statement that it's based on the same technology as Watson, will be correct even if they keep the same CPU as they already are using in the current Wii. It's all Power Architecture, and a marketing spin. Watson was the latest processor related story from IBM that went mainstream, so.. that's why it's mentioned.
Update: The A2 core is essentially a continuation of the path they took with the PPE in Cell and Xeon. It's the next generation. So If the Wii U CPU is a 3-core 3.2 GHz processor, it would be more or less on par with the Xenon CPU in Xbox 360. But it'd probably gain performance due to freakishly large eDRAM and newer generation GPU technology. The Wii U could very well be more powerful than the Xbox 360.
