Yes, Intel is fully aware of just how much influence nVidia holds and how damaging the good partnership between nVidia/AMD can be to them.
Like the article said, why do you think the X-Box switched processors at the last minute? It's because Intel realised the damage a consumer x86 platform with intel nowhere in sight and featuring cool technology would do to them. Not to mention it had the side effect of throwing a monkey wrench into AMD's plans.
It's fairly obvious that AMD's plans for the Duron centred around the X-Box, and they then had to market it much more as a value solution after having that market sabotaged (Duron's would have been sold as Value solutions anyhow, but not in huge quantity - it would have been a side role for the chip). AMD was hoping FAB25 would be kept busy and profitable supplying X-Box and Dresden would focus on the Consumer/Enthusiast PC side of things. If this had gone according to plan, AMD would not have dipped into the red recently and would have a great marketing line about powering the X-Box.
Still, we can only hope that perhaps some of these "political machinations" exist on paper somewhere. If those papers were to be made public, or get into court it could finally end Intel/Microsoft's Oligopy on the industry.
Greg