Throw on Linux, Steam and TF2 and I did include a gaming controller - a wireless keyboard and mouse. If you want me to add the cost of a gamepad then you need to add the cost of a compatible keyboard and mouse.
As for no wifi, you can get a wifi card for £5 but you don't need one. Besides, all the console users I know hate playing over wifi and use a wired connection anyway.
For an extra £5 you can get 2x2GB RAM, so no big deal.
Regarding the weakness of the system, it's not meant to be a good gaming PC, it was meant to offer similar performance to an Xbox360 which it does. Check the link again, those benchmarks are not using low-medium settings.
You're overestimating the requirements for gaming at 720p at 30 fps with low-mid settings. Even Brazos can handle a lot of games at that level.
As for the looks, I just picked any cheap case with PSU, given the variety and availability of them, I'm sure you could find one that didn't upset you if you looked yourself. Besides there's nothing really ugly about that case, it's just a plain, bog standard, cheappo case.
Linux really isn't a suitable gaming OS at this point, as far too few games are on it. Hopefully Valve will change that in the future, but that's just how it is right now. So there goes another £70 on a Windows 8 license.
I use wifi on my 360. I live in rented accommodation, so I can't just go drilling holes in walls and laying Cat5 everywhere- and just having cables trailing across the floor is a pretty horrible solution. A good wireless-N connection is my preferred solution, and a decent wireless-N dongle will be around £10.
Mouse and keyboard? For living room gaming, seriously? Yeesh. They are not going to work unless you are sat at a desk. For a PC meant for playing on the sofa, you want a good quality gamepad. The 360 wired controller costs about £20- and you'll still need a mouse and keyboard for setting up the PC and driving it generally. And no, I'm not adding the cost of a mouse and keyboard for the 360, because we're talking about a sofa gaming setup here.
I would most definitely want to spend the extra £5 on the doubled RAM.
As for the case- frankly, the main issue is that it is way, way oversized. You can't put it in the shelving units under your TV the way you can a console, and it will sit in the corner taking up a large chunk of space. People have come up with a solution to this situation, and it is called Mini-ITX. Mini-ITX case and mini-ITX motherboards are a necessity to a living room gaming machine, if you want to produce something approaching the convenience of a console. And both that motherboard and that case will be more expensive than their ATX counterpart. Getting the AsRock FM2 miniITX motherboard with WIFI will set you back almost double the number you had for that motherboard, for instance.
Don't get me wrong- I like SFF PCs, I think they're very neat, and I'm strongly considering a Kaveri SFF if it turns out well. But don't try to pretend that they're as affordable as a console.
EDIT: On the subject of SFF gaming PCs, I'm still waiting for a case manufacturer to copy the general layout of Alienware's X51. A mini-ITX board with a riser card for the PCIe-x16 slot? Genius! It lets you have a discrete graphics card but still keep the low-and-wide profile expected from consoles, set top boxes etc.
EDIT 2: Also, no optical drive? How am I going to watch DVDs and install old games now?