That Xi3 was just one of the many Steam Machine prototypes. Valve had 0 interest in releasing a single hardware and the plan was to open it up to OEMs like windows is.
The problem was that the minimum hardware was simply too weak, you can't have a gaming console on intel integrated graphics. Thus, the experience varied significantly with many finding they couldn't play games on the low end steam machines. The whole point of consoles was precisely about a guarantee that all games for that console would play. This poor experience on low end hardware pretty much killed the Steam Machines
In the end, most of the Steam Machines just ended up being released with Windows on them.