rumors are rumors...but this one is really not out there at all if you think about it...canon has everything in place....the only problem is probably how to bring it in at 2500$ with the 5dIII....which probably won't happen because development on that one is probably too far advanced...probably, probably, probably...
the real question is how does this raw shooting camera fit into the canon line-up.....DSLR or pro-video cam?
either way, at that point red is in trouble....
Price of a product is decoupled from the cost of developing or even manufacturing it, especially for a company like Canon. They have such a wide breadth of products and lines that they can adjust the margins as they see fit, effectively subsidizing some products with higher margins from others. If they feel RED is a threat to beat, they could sell the 5DIII at a loss if they so choose.
Or they could roll out their own (semi)pro RAW video camera and sell that at a loss, which could be catastrophic for a new company like RED; they have much less room to maneuver with margins, unless they have very patient and deep-pocketed financiers.
As you imply, I think one of the biggest challenges Canon has is where to fit the camera in their line-up, and to avoid cannibalizing their other products.
Enthusiast market would be happy with a dSLR design, without the ability to do accurate focus pulls or add proper steadycam rigs without some dubious after-market gizmos. But I don't see a dSLR ever competing with serious cinema- or even videography no matter how integrated the video capabilities are. And if somebody refers me to any Laforet video I'm going to scream
If Canon comes up with a RED-like camera built ground-up for video use without the baggage of dSLR design it would make for an interesting alternative to the pro digital video camera systems costing six figures. Speaking of which, a dSLR without the baggage of 35mm film cameras is long overdue, but that's another discussion.
Canon has shown with the 7D that they are not afraid to add entire new products into their line-up, even ones very close to existing cameras spec-wise, while very aggressively priced. 7D has most of the features in their more expensive pro cameras, to the extent that the only real differentiator is the sensor size and high-ISO performance.
Therefore I wouldn't be surprised at all if they go head-on against RED with a totally new product line. It would be foolish for them to dismiss the threat that is RED, as the hype might turn into a serious competitor in just a few years. Has happened countless times, especially in cutting edge electronics. If all they come up with is a RAW video capable 5DIII, I don't see it being a threat to anyone but Nikon - who I'm sure are working on exactly the same.
The good news is that we (the customers) win. Better products at lower prices.