If I were Valve, I'd probably have a run-of-the-mill gaming hardware setup with Steam on top of linux. The linux games would be labeled with a "Works on Steambox" seal of approval. All other games would require a Windows computer that's capable of running the game on the same network. The PC would then run the game sandboxed and stream everything to the console in an OnLive style gaming setup without the OnLive style input lag.
No announcement yet.
A Message From Valve's Gabe Newell