OK, i don't understand why does it have to cause such arguements. Try to run any consol port on a PC with an x1800 equivalent, set the resolution to 720p, the graphics settings to minimum, and you'll end up with a slide show. Consoles are simply more efficient than PCs, and at launch, they'll give you the performance of a 1000k+ PC for half the price.
Regarding using a 6670 equivalent (and the claim that it costs 140$), bare in mind that this is the price of a full card (including heatsink, PCB, Fan, Power connectors .. etc) which includes a profit margin for AIM partners as well. Of course MS/Sony won't be purchasing a full card, rather they would be buying a chipset (and memory chips if those were independent for the GPU, I have no idea how it works), and given the sales volumes expected, I'm pretty sure it'll cost them less than half of that 140$.
Another point, the 6670 is built on 40nm with a generation old architecture, given the long life span of each console, i don't know why would they do that !!! We have 28nm GPUs already, so i don't see any problem why MS shouldn't go for that, especially that by the time of release, it won't cost more to have a GPU of the same size but on a different manufactoring node. And given that a die shrink usually is applied in the middle of the console's life span, I believe the minimum they should go for is a 7770 equivalent.