Buena Vista Games is showing off Kingdom Hearts II in a big way at this year's E3. The title features a wierd mish-mash of Disney and Final Fantasy characters that's both a little unsettling and a little endearing.

The gameplay on display looked smooth and relatively well-polished for a title that's due out this Holiday season for the PlayStation II. Controls were responsive, colors vibrant, and graphics liquid. There were a few uninished rough edges, but we imagine those will be worked out in the next few months. One element of the gameplay struck me as off — the player-controlled character uses a big key (pictured in this screenshot) as his primary weapon. When one thinks of bringing death and destruction upon evil, a giant housekey is not the first weapon that comes to mind.

It appears that the game succeeds as a result of the zany mix of characters and the engaging, simple gameplay. It's good execution on a common theme that wins gamer hearts: the Kingdom Hearts franchise has sold five million units worldwide.

We stopped by Sony's oasis in the middle of the E3 floor to get a handful of demos on their new products and initiatives. The Sony product on display that changes the rules of the game and the business of gaming the most has to be the new "Station Exchange" application that will allow Everquest II players to buy and sell their characters, coins, and items online.

The auction system is simple to use. In mid June, players will be given the option to transfer their existing characters to one of the two Station Exchange-enabled servers that will open for play in late June. Once on this server, players merely step up to the same in-game mailbox that they use on regular servers and the shopping process begins. I watched a Sony representative drag an item from his character into the mailbox and click a confirmation dialog to confirm that he wanted to list it for auction.

Then he logged in to a web interface, set an opening bid, an "instant purchase" price, a reserve price and an auction duration (from one day to one week). This is all pretty standard auction stuff, but Sony has clearly invested in a streamlined interface. It's so clean and easy to use that he could have completed the entire operation in under a minute.

Players will pay $1.00 to list coin or items and $10.00 to list characters. Hear that sound? It's Sony's cash drawer ringing. When an auction is completed, Sony skims 10% off of the proceeds of the sale before sending money to players' PayPal accounts. Sony's cash drawer rings. And that drawer will keep ringing if Sony manages to grab a significant portion of the illicit trade in virtual goods, which estimates peg $200 to $400 million dollars per year.

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We have arrived. The E3 exhibit floor opens in just 30 minutes, but we've already been gouged, first by the nice gentleman in the parking lot nearby ($40/day) and then by the providers of the WiFi access ($25/day) in the cafe where we now sit with the rest of the bright-eyed and bushy-tailed journalists, fans, and industry folks.

We're hoping that this isn't a harbinger of what the industry has in store for us, but it just may be, with prices of new-generation titles reportedly headed towards the $70 mark.

Not sure who the original creator of this image is, but sometimes a little visual hyperbole captures the zeitgeist better than words. Just last week, this was the image of the moment.

Remember when we told ya to bookmark the official E3 site? If you do and you did, then it's starting to pay off, because E3 Insider has started to fill in with some high-quality content, including a good summary video of the Nintendo conference held Tuesday morning.

They've got the entire new Zelda trailer in there too.

IGN has posted an interview with Civilization IV's producer Barry Caudill, who provides more detail on the what's changed since the last Civilization title

• 3D engine

• still covers the 4000 BC to 2050 AD timeframe

• revamped movement and combat mechanics

• animated, dynamic landscapes (moving cows, flowing rivers)

• 18 civilizations

• better AI

• additional resources for trade

• new "religion" system for theocratic governments

• addition of the touchy (but historically accurate) topics of slavery and emancipation

• elimination of terrorism options (poisoning a city's water supply has become a taboo topic since the last Civ game)

• the most moddable version of Civilization ever

Visit the folks over at CivFanatics.com for great commentary and analysis on the IGN interview linked below.

NCsoft has replaced the City of Villains teaser site with a bloated, slow-loading (but pretty!) site full of details on the sequel for their popular City of Heroes MMORPG.

As the site FAQ handily explains, City of Villains is a "standalone" game in which players will be able to advance from low-level thugs to Lex Luthor types on the brink of world domination. Pictured above is a screenshot of the build-a-villain character creation screen, where the usual "skin color" options are presented in addition to "scales," "auras," and "capes."

The game will be released "this year", according to the site. With closed beta scheduled for July or August, it looks like they're aiming to have the game on shelves for the all-important holiday shopping season.

City of Heroes and City of Villains will share some game areas and many features in common, and one can also assume that gameplay will be very similar.

However, both games will have content areas that are available only to subscribers of their respective titles. (Will one need to subscribe twice or merely buy the CoV retail box in order to play both CoH and CoV?)

Despite the slick presentation, the site's got a couple of problems. First, even on our so-called broadband hotel connections, most sections of the site are taking 10 to 20 seconds to load the flash-based graphics. Second, it appears that some villainy is afoot with the hype machine: Warcry.com is quoted by NCsoft as saying that City of Villains is the "Best Expansion of the Year," yet closed beta hasn't begun and the game is still a good five months from launch.

Forrester Research published a piece that helps explain just what it is that Microsoft was trying to accomplish by eschewing E3 and announcing their product on MTV last night.

As we've noted in the past, and as Forrester corroborates, E3 and CES are where the big product announcements are made. Microsoft's decision to launch their console prior to E3 represents a deliberate strategic move that accomplishes several key objectives. Forrester calls it a "brave move" that allows Microsoft to:

1. "Side step the industry shindig and talk directly to potential consumers": Given what we know about the expected timing of the Xbox 360 release (November), it's early to be putting this product directly in front of consumers. The direct-to-consumer marketing hype generally occurs a few months prior to console launch. Microsoft's early launch risks "killing its existing hardware line sales and stunting software sales" as consumers begin to delay purchases in anticipation of the $300 to $400 they'll have to shell out later this year. In other words, Microsoft appears willing to jeopardize first-generation Xbox sales in order to ensure the success of the Xbox 360. They're hurting themselves, but they hope to hurt Sony and Nintendo even more by locking consumers into an affinity for the Xbox 360 earlier than either of these competitors.

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As noted earlier today, the Joystiq crew will be liveblogging the Xbox 360 infomercial to be broadcast on MTV this evening, without the aid of any timeshifting devices! Yup, you heard us right. We're headed into the maelstrom wholly unprotected from the commercial onslaught, and we do it for you, dear readers.

It's important to remember the context of this event: traditionally, console announcements are made at E3. Microsoft has chosen to break with tradition to get a leg-up on the competition and to own the gamer buzz for a few days prior to the big E3 announcements.

Microsoft (and Sony, and Nintendo) also want to broaden the gamer market. In order to do that, they'll need to change the "games are for geeks" stereotype by taking the product to the place where they print cool like it's an inflationary South American currency: MTV. If Microsoft can successfully associate the Xbox 360 with cool then they might succeed in getting their console into more homes.

Without further ado, time for some Xbox Launch Lingo Bingo. Here's how to play:

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The Joystiq crew will be liveblogging the big Xbox 360 unveiling to be broadcast on MTV this evening, but we need your help staying awake and cutting through the swarm of meaningless buzzwords that are likely to tossed at viewers like cheap candy from a parade float. 

We're looking for your suggestions! "HD Era" is a certainty, but what other marketingspeak are we likely to hear during this evening's special infomercial? We'll take your suggestions and whip up some printable bingo cards in time for the show so that you can play at home.

Sure, they're trying to sell the game industry stuff, and nothing sells like a little old fashioned fear, uncertainty and doubt, but they've got a point: "In 2004, game security became a truly serious problem for the computer games industry. Virtually every major game, including Halo 2, World of Warcraft and Half-Life 2 had a major cheating or piracy incident."

Here, courtesy of game middleware provider IT GlobalSecure, Inc., is a chronology of game hacking in the 21st century.

• 2001 - Cryptologic's software was hacked and lost $1.9M in a day

• 2001 - McDonald's Monopoly sweepstakes scandal

• 2003 - Half-Life 2 code theft

• 2003 - China's online gaming market admits $12,000 lost each day ~ 4% of revenues

• 2003 - Battle.net boots over 500,000 accounts (out of 10 M)

• 2003 - Everquest removes hundreds for cheating

• 2004 - ASF Texas Hold'em hacked

• 2004 - SOCOM Online Play hacked

• 2004 - Code theft for Halo 2

• 2004 - Code theft for Grand Theft Auto—San Andreas

• 2004 - Blizzard wins suit against BnetD (competitive open source game server)

• 2004 - Nintendo clamps down on piracy

• 2004 - Blizzard's Battle.net boots 500,000+ accounts from Starcraft and tens of thousands from Warcraft III

• 2004 - Online Poker-bot problems

• 2004 - Valve boots 50,000+ players within 3 months of releasing Half-Life 2

• 2004 - X-Box modder crackdown

• 2004 - World of Warcraft has major timing hack within 3 weeks of release

• 2005 - Sims 2 hacked

• 2005 - Halo 2 service boots several thousand users for cheating @ $50/subscriber/year

• 2005 - America's Army hacked

• 2005 - NCSoft adds security measures to Lineage 2

• 2005 - Tecmo sues Game Hackers

• 2005 - Final Fantasy XI bans 800 for griefing

The implication is that their products could have prevented all this, but color us skeptical. Never underestimate the ingenuity of bored high school students. Remember the whole incident with the felt-tipped markers and copy protection?

It's not quite as large as the giant, light-up piano at FAO Schwarz that Tom Hanks famously danced on in the movie "Big", but it's still the largest working NES controller ever. Gamers who visit the booth of G4, the "only 24/7 television network dedicated to games" at this year's Electronic Entertainment Expo will be able to play classic NES games on it, including Super Mario Brothers.

The hardware was last seen at the "i am 8-bit" art exhibit held in LA in April and according to first-hand accounts, the controller was a hit with attendees.

It measures 8 feet long and 3 feet wide. Pretty sweet-looking, though wethinks they need to hire some better booth babes if they want gamers to take them up on the offer for "free thumb massages" that they'll be doling out at the G4 booth. (Actually, that's the G4 production crew. We asked for photos of the booth babes for, um, research purposes, but they're not available yet.)

Crave Entertainment (a Los Angeles-based publisher of low-priced game titles) plans to bring a little religion to the PlayStation 2 and Game Boy Advance consoles with an October release of "The Bible Game."

Up to four players will be able to answer trivia questions and play a variety of mini games across snowy tundras, deserts, and tropical island environments.

This isn't a triple-A title by any stretch of the imagination, and it's doubtful that the game will do little to break religious gaming out of the trite bible-quiz rut that it's been stuck in since the days of clay flash cards.

However, it's nice to see some diversity in the themes of games that are released for consoles if for no other reason than it loosens the purse strings of the stereotypical reluctant grandmother who would never purchase more prurient titles for her grandchildren. If this game taps into the pocketbook of matronly prudes, that's a good thing (even if the game itself ends up being a mere graphical reskinning of ye olde biblical flash cards).

Sister site AdJab spotted a blog entry and accompanying Flickr photos showing the construction of gigantic new PSP billboard that's been erected on Houston Street in Manhattan. Strictly speaking, it's on the north side of the street, so that would be NoHo, but we shan't quibble because the photog did such a good job documenting the replacement of the excellent retro Yahoo billboard that was removed from that same spot in 2003.

Writes AdJab, "Not for nothing, but this is a pretty slick use of television screens with a computer projecting images of games, people using the device, and other PSP info. Then again, creating a giant anything and using it for advertising purposes is probably pretty successful, historically speaking."

How long before some joker kills himself trying to play the thing?

XGP Gaming is reporting "leaked" Xbox 360 prices. The basic package is expected to retail for $299.99 and will include the console, one controller and all the requisite cables.

The deluxe package is expected include an extra controller, the remote, and a hard disk drive loaded with extra content. It may also include the eyetoy-like camera, though details are still sketchy. The price? $360. Where in the world did they come up with that crazy number?