Well, as I understand it, the 360 did well in the 'longer haul' of this generation. While the clear winner was the Wii, it has effectively been dead for a couple of years, with the 360 making leads over the PS3 in Europe and I believe, the US?
So... if Microsoft see the 720 as being 'potentially a success' on its own two legs, what would MS do? Given recent history, they'd find a way of jamming Metro into it, somehow. I can see the 720 as being some Windows RT inspired device, aimed at being to your living room what your WP8 is when you're mobile, your Windows Surface device when you're semi-mobile, and your Windows 8 desktop when you're at a desk.
The fact that WP8, Surface and Windows 8 are clearly failing (miserably, in the case of WP8 and Surface) is unlikely to deter MS - Ballmer has been one of the most stubborn CEO's in recent history. His strategy to keep doing the wrong thing, no matter what sales, user feedback, OEM feedback might say is quite remarkable. Zune will succeed! Oh. Well, WP7 will succeed! Oh... er... XNA is doing well in the indie market, let's scrap it! .Net's entrenched in business and enterprise, let's suggest it's second class now! Let's buy Skype and just screw it in to everything we do! Let's do the Surface hardware on our own, our OEM partners will be fully supportive!
I seriously believe a Magic 8 Ball running Microsoft would do a better job, as decisions made entirely by random would have a better chance of sometimes being successful.
If Ballmer continues on this route, either MS will win massively in the long run (by being such an incredible visionary that he blind-sided the entire technology market, and all his ideas thus far have been part of some master plan), or (seemingly more likely) he will run them into the ground, until there's nothing left but a software company looking for a buy out.
And I'm fairly pro-Microsoft. For /., I'd actually be a fan boi.