While I don't think that a monster GPU is a good idea, I think that the use of a r700 is not forward thinking either. I believe that a GPU based on the VLIW 4 (6xxx/7xxx) architecture having a similar 1Tflops is a much better solution (and a much more likely scenario). The VLIW 4 would be easier to take full advantage of (according to AMD) and other tweaks for Tessellation, compute, OGL 4, etc would provide a better basis for future development.
As to PowerPC, if Nintendo uses a new generation of PPC based on POWER6 or POWER7, a tri-core would be a good solution. POWER 6 would be better than POWER7 though because of age and power/clock/thread. POWER7 uses both 2x SMT (like Hyperthreading) and also 4x SMT, but both of these technologies are of little use in a console. SMT only gives an increase in performance in poorly optimized programs. A console, which is very optimized by necessity, would see either little benefit or even see a negative benefit from SMT.
The basis of 512+ MB of RAM is likely an extrapolation from the fact that high end 4xxx cards must use at least that much RAM. I see more being possible, but probably not more than one GB.