As per the update cycle, I think it will work in a similar way to how they do now:
Currently, every 8 or so months, we get speed bumps, from (for instance) 1GHz to 1.25, 1.25 to 1.33, 1.33 to 1.42, 1.42 to 1.5
I figure that in the PC world where speed bumps of a relative amount such as these, approximately 100 - 250 MHz or so, we'll get the lines updated (so this will happen far more frequently, but of the same sort of jump).
I don't really care how far the chip lags behind its competition, but I know it will affect a lot of buyers once they can see directly that their prospective Mac only has a 3GHz Intel Pentium 4 chip when Brand X sports a 3.8GHz Pentium 4.