There's nothing wrong with an R700. If they give us an RV740 like chip, with some decent modern tesselation power, and a nice chunk of EDRAM slapped on there's nothing more to wish for. The R700 series was the foundation of all AMD graphics until this day, and a 'more modern' design wouldn't make much of a difference at all in terms of shader architecture or other basic GPU functionality as far as I understand.
The only thing they simply can't ignore is a tesselation unit. If it doesn't have a tesselator, it can 'only' produce the same graphics as the PS360, although probably significantly upgraded. If it has a proper tesselator, it can actually do new stuff the PS360 can't, and do every trick the next Xbox and PS4 can. This thing therefore has the potential to make the difference between last gen and next gen, although it probably won't be as significant as not having programmable shaders.
Reading wsippel's posts, it seems to me the GPU won't be anything like an off-the-shelf part. The period it was designed in was a period where tesselators were a standard GPU feature for AMD, too. I'm not too worried.