> I wouldn't be entirely surprised if Microsoft and nVidia already have
> something ARM-based cooking for the new Xbox though.

A week ago rumours to that effect (sans the "nVidia" part) have started to circulate:

"With a heady mix of rumors, tips and speculation, I am now stating that Xbox codename "loop" (the erstwhile XboxTV) will indeed debut a modified Win9 core. It will use a Zune HD-like hardware platform--a "main" processor with multiple dedicated assistive cores for graphics, AI, physics, sound, networking, encryption and sensors. It will be custom designed by Microsoft and two partners based on the ARM architecture. It will be cheaper than the 360, further enabling Kinect adoption. And it will be far smaller than the 360."
http://msnerd.tumblr.com/post/12233928364/clarity