If it is real, you can be certain of one thing: it will be very loud due to the fans.
Still, this isn't a problem because you wouldn't buy one for your house(unless you're rich or just plain crazy ).
But, the XServe is due for an update, so this does sound plausable.
I know it's not the right place, but going on from what Captain Code said, for most uses, surely the "new" IBM G3(gx?) would actually be better suited, as they draw less power, create less heat, etc. I mean. sure, Altivec is nice, but isn't it mainly used for GRAPHICS?.
There definitely is a market for low-cost, low-power, medium-performance chips. It would be great to see an entry-level system (think: what you'd buy your grandmother) at an even better price point, say $600 for an all-in-one unit, or $400 standalone.
Yellow Dog, Gentoo, hmmm... what's the other one, no can't remember. Anyway the aforementioned all work on OS X Server. The US Navy recently bought a whole load of XServes with YD Linux.