Microsoft has realized that currently the money is in getting people to pay for programs,games,movies,tv shows, music, ect... While mom and dad may not be interested in paying $500-$900 for the next XBOX, they may be interested in paying $100-$200 for this kind of system that offers the MS Store and all of the goodies MS plans to have in place by the time this thing comes out.
We've got three main competeing companies that want to sell us basic products to get into their stores exclusively. They want to tie you into their store with all of your devices. Phone, TV, Tablets, Home Computers. That is where the money is right now.
Will this compete with Linux running XBMC technically, no. In a market of people where most have no clue about Linux, programming, or XBMC. The closest Linux competition will will come from Apple and Google. We can keep our XBMC to ourselves because most people want ease of use. You'll plug these things in andthey'll run. Maybe the won't have all of the bells and whistles that we would expect, but enough to sell the main product, the store.