According to SmartHouse (Australia) on Oct. 19, 2007:
Microsoft, according to insiders at Toshiba owner of the HD DVD patents, claim that Microsoft is working on a brand new Xbox that will incorporate not only a new HD DVD drive but a large hard drive and new entertainment software that is a spin off from its struggling media center offering.
For Toshiba, the device is critical if it is to be successful in beating Sony and the Blu-ray promoters. A senior Toshiba executive in Singapore told SmartHouse that: "An Xbox with a built in HD DVD drive is critical. They and we are working on it. It also has to be more than a gaming machine. Microsoft recognise this. A version of the device may also be sold under the Toshiba brand name."
The new Xbox device [is reported to] include: extensive wireless networking, 1080p playback, a dual HDTV tuner, EPG capability, an open standard docking port similar to the 17 pin iPod port for an MP3 player, and a new open standard chassis system that allows an Xbox to be slotted into a HDTV screen over 40-inch and allow hard drives to be upgraded and expanded similar to the way that users can upgrade the hard drive on a PC.
The new device is expected to be released late in 2008 or at the 2009 CES show in Las Vegas.
Disclaimer: Someone pointed out that David Richards, the journalist who reported the article, may have some credibility issue. Please see Alternative Sources. (Which means you should read his articles with a fair degree of skepticism.)
Debunked: Both Toshiba and Microsoft have denied David Richards' claim.