Doesn't Microsoft ever learn? Last time they cut out a critical element from one of there products (the Start Menu in particular), and replaced it with sheer utter crap, the sales of PCs started a rapid decline in sales that hasn't been witnessed since the PC revolution began.
I'm sure that games will probably be digital-only eventually. This always-powered-on "feature" sounds like a joke. And of course, as we all know, second-handed games will become extinct (or more likely, illegal, yet thriving) since Microsoft believes in the power of DRM. Not to mention their paranoia that someone might engage in piracy as that would truly be the end of the world. Did I mention that Microsoft is probably doing this only so they can raise the prices of X-Box Hard Drives?
As for the "Xbox 4", or whatever they call it, they'll probably decide that controllers are too "obsolete", and force us to use Kinect, until some hacker(s) find(s) a way to add a controller. Guess what? No one will want to buy anything X-Box related.