What would happen?

Not related with the UI but more with the chances of the WM10, maybe the next devices will be separated in two, one line of devices running WM10 and the other running a full pc version with different UI to fit the size of a mobile device.

So it should might be the Surface line (the High end or Desktop like) and the Lumia (the mobile and mid range line).

I don't think so. MS would repeat the disaster (confusion) they created with Windows RT. Also there won't be any Lumias any more. They said so themselves. Surface is only for the high end so only other manufacters could maybe produce low end phones with W10M
 
I don't think so. MS would repeat the disaster (confusion) they created with Windows RT. Also there won't be any Lumias any more. They said so themselves.

They could change their mind of course. Seems like it's mostly an issue of branding at this point.

Surface is only for the high end so only other manufacters could maybe produce low end phones with W10M

On the other hand it's entirely possible for MS to create a Surface Phone that is a high end device running W10M, and for 3rd parties to do the same. The only question really is what "high end device" means. To me the X3 seems "high end". In 2017 using a fairly simple definition it should be fairly "easy" to maintain a higher end line by updating the CPU and memory. Granted, swapping screens or cameras is probably more work, but I would argue that those who are currently or recently seriously considered the X3, 950XL or even 950 would in the future consider essentially the same phone with better specs.