"Talks between electronics giants Sony and Toshiba aimed at agreeing on a unified next-generation disc format have collapsed, meaning that the incompatible Blu-Ray and HD-DVD formats will both probably make it to market."
I hope Microsoft has a backup plan to ship HD-DVD in Xbox 360 this Christmas. If both formats are going to ship this year, then it should be possible.
Balmer was saying "we'll offer an upgrade", but that would be a nightmare all around.
Much better to start out with an HD-DVD player.