I expect the portable xbox to be a little more, traditional looking. It'll probably look identical to the Gameboy Advance, and still have the two analogs w/ a D-pad. It would be perfect for a Katamari game, but alas.
Umm, they're gonna have fun knocking iPod off its perch. No other mp3 player has managed despite superior products. iPod is like the only player in which 1. you can't access the songs you've put on it. 2. doesn't have a built in microphone and 3. doesn't have a radio built in, but it still manages to sell more. Why? Its too powerful to be killed by a stupid microsoft product. Once Apple decided to improve their image, they did, and nothing could stop them, and with the iPhone being released, its going to be even harder as Apple will have a huge market share in another area.
It'll be pretty hard to detach me from my iTouch, although I am interested in this and would probably get one anyway. It would have to be able to fit in my pocket for it to be any good for me, and if the picture is anything to go by it won't