see I was right, it is about Blu Ray vs HD DVD.
My point was.... MS is just playing along, giving users some options... they are NOT here to play the HiDef disc movie game as some want them to. It is a game machine and a 720p digital distribution machine.
MS does not own its own movie Studio nor do they stand to benefit from Blu Ray as Sony does (or HD DVD) so they have no reason to play on that movie playground, beyond giving users some options.
It think they are serious about the Live digital distribution. If so they will
need to drop the price on the 120GB drive when they drop the elite price as they need to maintain my Premium + HDD = Elite scale theory
. I think time will reveal a strategy yet unseen.