Actually this does seem pretty horrible, and he did predict my response correctly. Basically what it sounds like is that he's turning Fable into an action game with improved story telling elements rather than an RPG in any way, shape, or form. What is described wouldn't even pass as an action RPG from the way it sounds.
I imagine the idea is that he (like many) are thinking of RPG gamers as a niche audience and feels that he can make more money by removing all of the stats and such that make something an RPG and get more users/sales by simply making an action game with a decent storyline and some non-combat interaction.
I personally do not care for the trend, largely because I'm an RPG fan,but also because I think it will end badly. All these RPG developers setting sale for "Action land" simply means that the action market dollars will be tugged in more directions and in the end more companies are going to fall when they are overcome. In the meantime the RPG market will go through another dry spell, until someone figures "oh hey, I can make money by doing RPGs, maybe not as much as the biggest action shooters, but a not inconsiderable amount" and tap it again until of course they inevitably get greedy.
So, basically Peter is jumping ship on even trying to make RPGs, and knows that this is going to irritate the RPG fans who had been supporting the series despite their complaints. But in the end he doesn't much care, because the grass is always greener on the other side of the pasture, and right now he thinks he's heading for some bigger paydays. The fact that he admits he's going to upset people, doesn't change the fact that he is stabbing a good portion of what fan base he had in the back.