Well, that's what I thought when Sony released the emotion engine in the PS2. Sony is lucky they had such a strong 3rd party support with their games, or the PS2 would have sunk them, and sunk them hard. The emotion engine was a serious bottleneck on the PS2. Supposedly, they're beefing it up some and dropping it into the PS3. Here's the issue: ATI cards render 8+ graphical pipelines per pass. If the PS3's graphics processor follows a similar chipset to what they were using, they'll only be able to render a maximum of 4 graphical pipelines simultaneously. The processing capabilities will be cut in half right there. The CPU will have to take on the other half of the work to match the Next-box and the new Nintendo system, so it will HAVE to be twice as fast physically, to do the same work.
The same principle existed between the X-Box and Nintendo Gamecube. The X-Box was on an NVedia chipset that only rendered 4 pipelines at a time, and the Gamecube worked off of an experimental ATI Chipset that had 8 layers drawn simultaneously. The GCN only had a 450 MHz CPU, however still produced games graphically equivalent or graphically superior, in some cases, to the X-Box, which ran a CPU of ~800 MHz.
The issue is, if Sony follows their past, they're also going to annoy some of their strongest 3rd party supporters. Square-Enix is still annoyed at Sony for not licensing Crystal Chronicles, hence why they went back to Nintendo for that game. (If Sony lost the Final Fantasy series, they'd be sunk.) And don't forget how many Sony supporters switched to Nintendo once the Resident Evil series was redone on the 'cube. (Resident Evil 4 is one of the most amazing games I've played... graphically, and gameplay wise.... it's incredible.)
Once again, I'm willing to predict Sony will only be saved by its 3rd party support, cell chip or not, and the true processing powerhouses will be showcased in the NextBox and the new Nintendo system.
Quick Edit: Also - think of what Nintendo and their third parties are capable of doing with such a small ammount of actual processing capabilities available to them. Remember Conker's Bad Fur Day on the Nintendo 64? That game, for what it was, was a technical marvel, not to mention hilarious. Perfect Dark, Goldeneye, Conker's Bad Fur Day and Donkey Kong 64 were all perfect examples of what can be done on such a small ammount of true power. Then look at what was done on the Gamecube, with Rogue Squadron 2 and 3, the Resident Evil series, FF:Crystal Chronicles, and the cell shaded masterpiece, Legend of Zelda: Windwaker.
I've got my bet on Nintendo for this round.... rumors have it they're offering a service like X-Box Live, only for free. They weren't releasing the network capabilities on the 'cube because they were developing and saving for something further down the line. This is still yet an unconfirmed rumor floating around the IGN Message boards, but there has been a lot of posts deleted at the request of Nintendo of America... which seems a little suspicious to me...