Instead of pointing out all of the holes your logic is "riddled" with, let me just make a few statements.
160 GB is measly compared to most standard harddrives.
The console will support only as good as graphics as the games are made with. If I play Tetris from the 1990s on an X-Box 720, the graphics are still crappy; not 'life-like'.
"graphics which exceed any PC." Ahaha. Most MMORPGs have better graphics than Call of Duty. Yes, even the free MMORPGs.
"The Xbox 720 will involve Windows 8" If it involves Windows 8, the X-Box will remain a piece of crap.
"I know that the PC will be dead from a gaming standpoint in 5 years." Based on what facts, sir? Yes, sales are declining but that does not in any way mean it will die.
QFT