I thought Tegra 4 or something in that rage, was a MUST for OUYA. But they didn't listen, either because it was impossible to make the switch at that point, or they couldn't get a good Tegra 4 deal, or they just didn't think it was that important. But I hope they at least expected that this is going to hurt them at least a bit, and they might need a change of strategy.
I think OUYA could still succeed if instead of targeting it against Nvidia's Shield, and towards more "hardcore" gamers, they target it more as sort of a "toy", like something they could sell at Toy R Us on the cheap, and for sub 12-14 year old kids. Another strategy is of course promoting it heavily as a cheap media device, kind of like an Apple TV or Roku alternative.
There's still a way for them out of this, if they do it right, but personally I'm still disappointed it's not coming out with a Tegra 4 chip or something cutting edge like that. Hopefully OUYA 2.0, if launched in 2014, will have Tegra 5 or some other cutting edge 64 bit SoC with support for OpenGL ES 3.0 and OpenCL. This is the sort of stuff that gets "gamers" excited, and they've kind of ignored that. But again, it might not be a huge problem for them, if they refocus on a slightly different market.
And I agree that OUYA, Shield and other such devices will basically help each other, and Android gaming in general.