If this rumor is true, I think it's evidence of Canon beginning to make mirrorless the new point-and-shoot market.
As camera phones devour the point-and-shoot market, Canon needs a new consumer-level bread-and-butter line that's good enough to be a clear advantage over camera phones but low enough in feature set to avoid cannibalizing the DSLR market. It wouldn't surprise me if Canon introduced several slightly different flavors of the the consumer-level M. For the consumer market, I doubt any of them have any clue which generation of sensor is in the camera, and they probably don't care. If it's cheap enough and has nifty enough features and is easy to use, the consumer market will be happy.
How such a strategy might fare against competing mirrorless offerings will definitely be interesting. As long as Canon does produce a high-end mirrorless body with all the whistles and bells -- and at a price congruent with DSLRs and/or competing high-end mirrorless solutions -- then it could be a good strategy. If Canon can(will) beat the competition at the high end, it will be free to play around with shaping a new (mirrorless) consumer market as its managers please.
Just remember that the features (or lack thereof) of the EOS M that cause us to grind our teeth are part-and-parcel for the consumer market. What it will all come down to is price against the competition and its feature set. Isn't that what competition is all about?
Obviously, neither the current M nor the M of this rumor represent a serious attempt by Canon to show the world how the ultimate mirrorless body should be done. If/when Canon decides to make such a statement, I'm confident it will be nothing less than spectacular. Meanwhile, we can all speculate on what will motivate Canon to do it...oh, and take some pictures between forum posts.