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LoudMusicIt is FAR more powerful than the current consoles and could be even more powerful very easily. It is also cheap and includes a ton of software that you would not need on a console, which would aid in cost reductoin.
I think you'll see the second rev of PS3's hit that size, but not the first. The new chip's heat dissipation will probably be an issue in a way that the G4 is not. It'll take a while for IBM to get that chip to run on lower power.
Remember that the PS3 is going to have a PS2 inside it (and therefore a PS1 as well). Add in a new disc format, and I think that insisting on a mac mini is just going to be too tough.
For me, as long as it's smaller than a current XBox, it'll be fine.
(BTW, I do love the mini.)