Whether consoles merge into PCs and media centres depends on whether companies like Microsoft want this to happen or not.
I personally don't think MS or Sony or whoever want the lucrative console market, where they have total control over hardware and software, to evolve into something where they can't have overall total control.
And the average consumer would rather have the simplicity of buying a console off the shelf rather than having to worry about different configurations and what's actually on the inside.
So how these fundamentally different perspectives could merge into one is not immediately obvious to me, no matter how similar the hardware inside might be.
I think his point was that the console would expand while still being completely under tehre control. Its hardly unfeasible to see a generation of consoles incorporating massive storage space where people can play games and maybe browse the internet a little if they bought a mouse/keyboard attachment. There is nothing different to todays consoles for you 'merge'. They already offer consoles with different storage space on them, whats multiplying this by 10 and adding in different media based configurations that are also restricted? The stuff that makes it run is no different and under there control, optional extras are a bit more open but would still be unchangable.