Speaking with Major Nelson, Microsoft group product manager Aaron Greenberg speculated that a version of Xbox 360 specialized for IPTV and DVR activity was certainly possible. Greenberg admitted that "[Microsoft] did not build [Xbox 360] to be a high-definition DVR," suggesting an IPTV upgrade (i.e. larger hard drive) and IPTV-specific console "configuration" were both possible solutions to the inherent dilemma. Greenberg did note that a larger hard drive would only be necessary for DVR functionality -- IPTV could function with or without a hard drive.
While this is hardly confirmation that a new version
of Xbox 360 is inbound, Greenberg's statements may indicate that Microsoft is closing in on a strategy for 360 v2; one that won't upset early adopters (at least, not as much). Marketing v2 as an IPTV/DVR device (PSX, anyone?) might be enough of a diversion to excuse the original Xbox 360's lack of substantial hard drive space and HDMI output. If that is to be the case, it will be imperative that all of the v2 components are available for the original console, including a free IPTV software installation (with purchase of contract, of course).