Replace "Steam Machines" with "Andriod" and you could make the exact same arguments. And the thing is people have, and they have been to an extent completely correct. But, I don't think you would say Android hasn't been a very successful bet for Google, despite the fragmentation and huge range of quality for different mobile devices, and the problems with branding they have. What I'm seeing is Valve trying to make the exact same play in the console world, where Microsoft and Sony have it locked down very much the same way Apple did (or was on the way to doing) with the smartphones. They want to break people out of those walled gardens and bring them into their ecosystem, and they're going to provide an open platform for any hardware maker to do it, just like Android did.
Of course mobile phones and consoles are two different industries, it might play out in a similar way or it might play out completely differently. But I think it's a bit premature to write it off as ridiculous or even a bad idea from the start when there is precedent for this sort of strategy working in other industries. It certainly has a chance of playing out well for Valve, branding and fragmentation be damned, as long as it opens up a much larger audience to Steam.