re: Sources:Upgraded PlayStation 4 is Codenamed NEO, Contains Upgraded CPU, GPU, RAM

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I do believe the quality of your average PS4 title is going to decrease in some fashion. How much so depends on what the devs can get out of the new system

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I don't see that happening. This isn't a new console just upgrades. It is more like a PC running on high or medium as others have said.
The only way it would become a problem would be if the game was pushed too much and simply won't run on the lower specs. That is not what will be happening.

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Look at how Hyrule Warriors plays on an original 3DS.

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Well that is a leap. We are not talking about that big of a difference in platform.