Frankly, farfetched is too nice of a word to describe this rumor, but the idea of an iRecords isn't that new or ludicrous. Obviously, SJ's got issues with the folks standing between him and musicians, and putting musicians under his own wing would allow him to digitally distribute their music DRM-free, and collect all the profits for himself. There's blood in the water around the recording industry, and the time is ripe for someone to jump in and take over.
Of course, this is Apple, so there's more to the story than that-- their first battle would be convincing Apple Records to come to some kind of agreement. Then there's the actual music management function of it-- Apple's great at serving consumers, but would they be able to serve the function of a record company in terms of promotion and booking? Digital distribution is super (and it definitely cuts down on costs), but no one's buying your music if no one's heard of it.
Then again, SJ managed the content producers at Pixar just fine, and if he has a little help (the Moli report says Apple has hired a publicist from Capitol Records), things might just turn out OK after all. I doubt Jay-Z and Beyonce are really involved, but if His Steveness decides to form a record company, he might just put the last nail in the traditional recording industry's coffin.