I think the Steam Deck showed that people don't really need top of the line graphics to have fun. It's just the marketing of triple A games that push graphics graphics graphics and Nvidia want you buying a GPU every year so have their hand in that too. FSR shouldn't even be in the discussion.

An affordable Steam Machine would go a long way to replacing traditional consoles, with Proton running most games now, I see a lot of people enjoying a device like this. There could always be more powerful options later. This is all speculation though, we don't really know what Valve is doing and this could just be experimentation towards a new Steam Deck.