I'd be willing to say it would. APUs are not really meant to be standalone CPUs, so CPU performance there is kind of moot (or way less important) and for 99% of games you can play on an APU, the iGPU is the bottleneck anyway, so having a lesser CPU with a much stronger GPU will let you get a huge boost in FPS regardless; like you would with a mid-tier GPU and the APU/CPU. It would not kill the whole market, but it would definitely put a huge question mark to the APUs viability as cheap gaming machines compared to this with the iGPU.
Also, it may not be upgradable, but it does come with 16GB as an option, no? That's plenty for such a system anyway. You can think of it as a laptop with fused RAM or something. And then you free the PCIe for... something... This would make the perfect HTPC, definitely. It's like an APU with HBM, no?
And as for the "it's still just RDNA2". I am not sure that's a good statement to make. I have no idea what specifics Sony wanted in the GPU outside of what AMD designed and offered, but I doubt it's simple to make them DirectX compliant (or Vulkan). In other words, like I said, the investment they'd need to do with the driver modifications would make this product moot. Or even less of a good idea. It already is a bad idea as presented, but oh welp. With the iGPU at least it would've been interesting to tinker with.