We've been rumoring HD-DVD for the Xbox 360 since day one, and even though we got word in November that the drives might not be intended for gameplay, IGN is reporting that Microsoft is planning to launch an HD-DVD version of their console early next year. At least that's what they're hearing from Jiji News in Japan, though of course Microsoft is keeping mum about it. The word is that Microsoft is in the final stages with Toshiba developing HD-DVD 360, and plans to release post Spring sometime, which, if true, might "conveniently" land it in the timeframe of Sony's Blu-ray clad warrior, the PS3.
Update: As pointed out by xumdeo, this has been denied by Microsoft Japan. According to Impress Watch, Microsoft said "at this point in time, there are no plans to release an Xbox 360 with a next generation DVD drive." No plans? At all?