Pretty much. It would be a horribly inefficient and wasteful move to add 4GB of expensive ram, run around proclaiming you are the machine for gamers, by gamers and how you're listening to developers by the addition of that RAM and then block of 88% of it and give developers maybe an extra gig of it to play around with over what they had before while using the rest of it for some undisclosed OS features.
The 3.5 number makes no sense given the One was designed from the FLOOR UP to be a general purpose multimedia box, is running 3 OSs and has integrated Kinect functionality while only using 3. Also, why wouldn't you design the system to have a mixture of DDR3 and GDDR5 if we were going to use so much for the OS. It makes no kind of sense to add 4 GB of relatively expensive GDDR5 for the bloating of the OS. I find the 3.5 number hard to believe given the announcement was made BEFORE the revealing of the One and that the One would be a general purpose multimedia box... so it couldn't have been added as a reaction for OS functionality.
The fact that people are saying 4.5 is 'fine' and a ton of RAM for game development just goes to show you how utterly ridiculous it is that the OS is blocking off so much of it. If 4.5 is fine for highly advanced next generation games, then what could possibly be running in the background to necessitate 3.5 of it being reserved? 4.5 might be 'fine' for now, but it won't be in the future. If Sony is blocking off so much RAM, they need to be criticized even harsher than Microsoft for going on about being the gamer's console and then actually blocking off MORE RAM for no apparent reason.