Beh ! MS announced Xbox 1.5 a year ago already. It was supposed to be about the same size as PS2, same Xbox shape only without the ridges on either side of the X marking. But I think they canned the plan to spend the recources available on the current Xbox.
The only way, IF at all, "Xbox 1.5" will see day of light is as a budget Xbox when Xbox2 is already launched. Indeed kind of like what the PSone is to the PS2.