Never in my wildest dreams did I think any of the main players would push HD as THE big next thing for gaming next gen. I mean, really. We already have some HD games now, it just seems like such an obvious and logical progression - something that should be taken for granted, not pushed to the fore of your marketing.
That said, Allard claims the "HD-era" is about more than displays - but God, it's such an annoying phrase, and to the regular joe, all they're gonna think about is HD displays. If it's pushed as one of, or the major selling point for Xenon, those already with HDTVs will ask "what's the big deal?" - since they'll already have HD games on their Xbox, and would simply expect it with Xbox2 - and those without will ask "so why should I buy one?".
It could also really inadvertantly hand ammunition to Sony, if their machine is more "HD" than Xbox 2 (with Bluray, versus regular DVD, possibly).