And this is using "reboot" in the sense of a "reset". If they rebooted, in the normal sense, it would mean that they would be remaking the series with a new vision. This means it wouldn't go back necessarily to "Gen 1", but an alternate interpretation of "Gen 1". For example: It would still have Mega Evolutions/Z Moves, and possibly even design changes to old Pokemon; removal of some of the forgettable Gen 1 Pokemon; likely including select post-Gen 1 Pokemon and whatnot. It wouldn't be the Gen 1 that started the franchise.
It would be more akin to reboots in comics. So a rebooted Batman is still Batman, but the rebooted version now has a huge alcohol and drug problem, and sometimes loses control and hurts himself and others. Alfred doesn't exist in this reboot because Batman killed him during one of his rampages.
This is essentially what Lockstin is saying is going to happen. And personally, while it's only a theory, I don't think it's too far-fetched.
It's true that a full reboot wouldn't be profitable for them, for reasons already stated. But they could change up their formula, like they're doing with Sun and Moon; away with the gyms, maybe even the whole Elite Four and Champion deal. They could come up with something new; something different, but something that still appeals to their target audience. As Lockstin said, I feel that the fact that Sun and Moon is mixing things up is an indicator towards them 'testing the waters', seeing if people like that sort of idea. They're experimenting. But a reboot doesn't necessarily mean everything needs to change or be replaced -- it would just be a much more radical change than anything they've done in the past.
This doesn't necessarily mean the Pokemon will all be replaced or changed. For evidence of this, I point to Gen III and V, where everything that was said about them being unsuccessful due to being reboots was true. I do think they were reboots, but soft ones, because they never really changed up the formula -- the only thing they really did was replace the majority of the old Pokemon with new ones, which also happens to be people's chief complaint about them. But as we've seen with X and Y, as well as Sun and Moon, they've been trying to include Pokemon from all generations and keep that from happening again. I think they've learned their lesson; any reboot would include as many older Pokemon as possible -- possibly removing some of the least popular ones, but even that's a risk.
Basically, what I'm saying is that a reboot doesn't necessarily constitute an entirely new game. As Lockstin said, it's the beginning of a new cycle. A new formula or new gameplay mechanics; perhaps even a more mature/complex story. And 'more mature' doesn't necessarily mean all dark and gritty; think more like Pokemon Mystery Dungeon's level of story and character complexity, and Pokemon Origins' levels of maturity.