I predict that Microsoft will release the xbox 720 (or whatever it is called) This fall during christmas retail season. It will have a blu-ray drive, 2 gig of ram, and a 3 year newer GPU and and CPU, but otherwise will just be a mildly faster (say 4 to 8 times the existing pixel fill rate over all) than the existing 360. Microsoft brand XBox 360 perephrials will be compatable with it, but third party accessories will all be broken. Oh and it will include the MS version of the wii mote. Because it is, from a technical standpoint, the existing 360 just with a few upgrades, it will be 100% backwards compatable with 360 software.
I think the MS version of the wii mote will forgo the motion controls, and it will just be a pointer. Its main use will be for some version of Internet explorer on this device. Web developers only option for getting multi-media enabled web pages on it will be silverlight, it will never support the Adobe products. It might even be hampered in the areas of DHTML, again to get those sorts of effects, you will need to use Silverlight.
It will retail in North America for about $600.
This fall? What? No way for a mild updated 360 basically.
Next xbox will not appear until sometime in 2011.