yes it does, but it would be cheaper and have backwards compatibility with C64 software. Plus, a 20 MHz 65816 is faster than a 7 MHz 68000 so it could a very interesting package. Timeframe around the original C65, 90-91', A500 would be replaced with A1200 in a year, A600 would not be needed.
It wouldn't have had meaningful backwards compatibility, just like the C65.
In 1989 they should have had an 020 machine with chunky graphics.
I'm not sure that the 20mhz 65816 used by CMD was available that early either.