Microsoft would produce the software, bringing the goodness already delivered with the Xbox LIVE service as well as the resources to provide cloud based server clusters for game streaming, delivery and housing of PlayBox account holder data and game saves. They just need to do their security better than Sony currently does.
It could be a kind of gaming Nirvana for fans of home based interactive entertainment. But there is a downside. Sure cherry picking the best bits of the current Sony and Microsoft offerings could produce a gaming console with few flaws features wise, but the unholy match of Sony and Microsoft removes the major consumer winning benefits; Innovation and Price.
With Nintendo (and PC land for that matter) doing their own thing, what real reason does the PlayBox have to drive the art of interactive entertainment forward? Not much, if there is only one choice for your average power-hungry gamer, then that's what they will get. And it will be at a price dictated by our new gaming behemoth Mony.
Still the good news is that this will never happen. The business culture and past history shows that neither of these two companies, both protective of IP and profits, would consider coming together on such a project. Instead each R&D department is now ensconced deep within the bowels of their respective research dungeons dreaming up ways to pump more features and power into an attractively priced piece of electronica that will stimulate the saliva glands of the public at large.
So the PlayBox, which is a terrible name, will never emerge, instead both Sony and Microsoft will try to out-do each other come Next-Gen time, and this is a good thing for all of us.