If they just do a port to Intel and put out a boxed OS X that'll let people try it on their Wintel boxes, they are dead. It'll be 'BeOS II', a toy for a few cheap geeks to play with and then dead trying to keep up with all the hardware. The complaint will instantly shift from 'It should be on Intel because I'm too cheap to buy a frickin iBook' to 'It needs support for my shitty hardware XXX'. The hardware vendors can barely support Windows let alone an 'alternative' OS. Linux manages with older hardware because of legions of geeks reverse engineering.

If they use a hot AMD processor and put it in a proprietary case and firmware so that nobody can make clones, they'll get attacked by the same people demanding an open architecture because once again, they're too cheap to buy an iBook. A hot AMD processor won't make a PowerMac one dime cheaper, although it would be more powerful. The laptops will need a less hot solution, and that's really the forte of Apple anyways.

The clones weren't expanding the Mac market, they were just eating into existing Apple customer base.

As you quite rightly point out, Apple is a niche provider of luxury computers and they LIKE IT THAT WAY. They're not going to dirty their hands in the hoi polloi of x86. However, the power needs of a modern OS and software are growing too fast for the crappy motos to keep up with.

I do think they'll be all over the PowerPC 970, but that's a good year away yet. Sigh.