You seem to have forgotten your argument. You said 'how will existing HDDVD drive owners feel.' That's because to get HDMI they'll need a replacement SKU. Well with the external HD DVD drive, they can get the XB361 with HDMI. That'll cost say $400, ignoring any tradeins, and of course they can sell the old XB360 for some of that money. Sure it's an expensive upgrade, but it's doable and still cheap then buying a standalone player (assuming prices don't drop dramatically). Furthermore there's no need at the moment to get HDMI. They can carry on with their existing playback, if the quality isn't markedly better from HDMI, which seems to be the case, and get an HDMI XB360 when they're $150.That older model is now $444 at Amazon and the newer one (HD-A2) is even cheaper, $409. The 360 add-on is $219 (but currently sold out at Amazon). For those who want to watch HD DVD but not really interested in games, 360 is not a cheaper solution.
The only other options for MS are
1) They shouldn't have launched until HDMI 1.3 was ready to cover the glut of HD formats, which would have had a long delay and lost their important first-platform advantage.
2) Don't provide any HDMI version and prevent users having that option, and get grief from 6-stars about how XB360 doesn't have HDMI
3) Introduce HDMI along with HD DVD and other options when viable and provide an upgrade path.
3 is normal practice and perfectly fair, catering to everyone. I don't understand what there is against this move. An improved XB360 was always on the cards in the same way consoles get revisions (What about PS2+? What about those who bought a PS2 without the quieter operation? What about the introduction of the PS2 slimline with inbuilt network adapter, and the subsequent discontinuation of the old network adapter that makes them hard to come by?). Technology moves on. You get what you pay for when you buy it. There's no point in grumbling when a new improved flavour comes out.