If you think about it, a dualcore ATOM processor would be pretty close, or even faster than the Xbox 360's processor so it isn't completely unbelievable in that aspect. The question remains, is the GPU as fast? Hard to say.
Also, you have to remember the Xbox 360 will be processing at near 720p or higher levels, where as this portable gaming device might only a have a resolution of 480x240 or something similar. That would mean that in a relative sense, the games could be more advanced.
I'm not sure what to think at this point. On one hand the Xbox 360's tech is pretty ancient and there are a lot of excellent mobile technologies coming out, but on the other, how can something like that function with any battery life at all. the PSP had 4-7 hours depending on the exact unit, the usage, and the firmware. That was still considered low.