But if you're customizing an x86 design what waste is there? MS *needs* x86. Prevalence of x86-only software is the only Microsoft is still alive. Have you seen how MS has handled ARM with their winRT?
Furthermore, you'd get a better on-die GPU with AMD.
Lastly, the price is a non-issue. AMD already has very very good pricing on their GPUs they're selling to the console makers so why should a custom design CPU cost more than a competing customized CPU arch?
Had AMD been stuck with GloFo I'd have said this rumor couldn't have legs to stand on. But considering they're allowing to incorporate 3rd-party IP and they severed final ties with GloFo I personally think it makes more sense than PPC. Neither MS nor Sony will spend lots of cash on hardware this round and AMD's consumer APUs are already cheap and aren't suffering from yield issues (this point doesn't really matter much as the WSA would be signed by MS).
I think the x86 uniformity for developers would help immensely as well. This allows for for more games across all platforms and better games for PC gamers as well. Can you imagine having games coded close-to-metal with semi-modern hardware and x86? There would be fewer hurdles for devs to jump through to sell their products.