It's been said XB360 connects directly to iPod for playing music, and this was also shown on the Money Programme special. However what MS had failed to tell us was it won't play iTunes DRM'd music, so if you're iPod is populated by music you've bought over iTunes, that music can't be used.
http://www.gamesindustry.biz/content_page.php?aid=12801
http://www.gamesindustry.biz/content_page.php?aid=12801
...but what's less well-known is that the next-generation console will be unable to play songs purchased from Apple's iTunes Music Store.
That's according to Microsoft's Jeff Henshaw, who told CNET News.com that because of the digital-rights-management (DRM) software in iPod, playback of those tracks was not possible.
Henshaw said Microsoft had tried to forge a partnership with Apple on the issue, but that Apple had rejected the idea.
During the same interview, Henshaw also declined to comment on whether Microsoft has had to engage in any reverse-engineering to achieve iPod compatibility.