My computer can output to a TV, and I've got a widescreen one, so that's always my argument against owning an Xbox, of which its best games (or at least nearly all of the highly-hyped ones) come to the PC. I'm always like, why wouldn't I just get the PC version instead of buying this redundant console?
People seem to think of PCs and consoles as being two different markets, which I've resisted as much as I could because for me, personally, there is no distinction. Sure, I tend to like the kinds of games more typically seen on consoles, but if they're also available for the PC, I enjoy them just as much on my monitor (when I'm not hooked up to the TV).
One thought that I had about a possible end of console gaming is the price of the hardware for the manufacturers. If, for example, Microsoft really does lose a lot of money on their Xboxes, but they make money on selling the software, if the innards of the Xbox are similar enough to a PC's, why not just sell Xbox emulators (cheaper than making a dedicated console) and continue to sell Xbox discs?
The distinction is there, between a PC and console market, but is it just about the whole living room space thing? If computers move more into the living room, then why? Sure, there's still a difference between a $200-$400 console with minimal installation or a $600-$700 video card that requires you to gut up your computer, but if the manufacturers want to stop losing money on hardware, they could push this inegration and then the Xbox 720 might be an emulator.
Possibly unlikely, but I think the reason why Microsoft and Sony throw money into the black holes of making loss-inducing hardware is that they have enough revenue from other sources to support it, and if they can to the point of pushing out all competitors, then they'll have a monopoly and can charge exorbitant amounts of money on games to make it all back. Yeah, right...
EDIT: No, I didn't really read this topic too thoroughly and I'm sure many would think this idea was silly. Just a thought I had. I'm sure for certain manufacturers like Infinium Labs, whose Phantom (does it even exist?) seems too much like a PC that it should just be a DVD-ROM for your computer for a game-selection interface. Which sounds pretty lame but that's what I was getting from the little I saw of that thing anyway.