I think that Phill Spencer's idea about a hardware upgrade is just fine. You could buy an Xbox that is actually a PC, just like Steam Machines. The difference is that you can upgrade it, just like every PC.
The game version is the PC one and you can choose your graphic standard, resolution, fps, mods and even "ultra settings". The developer just need to make a PC version.
Soon Xbox and PC will be a single plataform. Gamers will be able to upgrade their console just like PC and the process started already. Xbox games released on PC are the way to prepare the community. The store is the same, but i have just one doubt: the price. If Xbox games could have the same PC game prices, the console competition will change.
Zicoroen's comments