It looks okay, though I do think they could do a lot more with the internals. The only parts of a Steam Machines I really want to be serviceable are the GPU (so room for a good sized, double height card is a must) and the internal storage; a hot-swap style bay would be ideal (obviously not actually hot-swappable, just easy to open).
Everything else can be made as compact as possible, with a custom fitted heatsink and fan(s) for maximum airflow.
Or even better if they could get some kind of deal with a liquid cooling manufacturer to provide a two plate liquid cooling system a horizontal radiator using big blower style fans (so you get the advantage of big fans but low height). So long as the cooling can easily be adjusted to fit onto AMD and Intel processors and ATI and NVidia GPUs then it could be a really good way to do this.
Obviously it's early days, so it's good to see as neat a system as we do in these prototypes, but I think there is a lot of room to innovate in the PC as a console space, while still retaining upgradeability, even if it requires a few extra steps to get at certain pieces.