It seems like just a couple months ago we were throwing this old chestnut out the window and now, like a Siamese cat on a perilous journey, it's returned to us, more or less unchanged. This time, Digitimes is reporting that Microsoft is working on a "new-generation" of Xbox 360s equipped with one of those fancy HD-DVD drives on the inside instead on the side. Who says? "Sources" in Taiwan's no doubt well connected optical disc drive industry. Last time it was an Australian Toshiba rep wondering aloud and Microsoft following right behind, dancing the PR two-step, stating there are "no plans to release the Xbox 360 with an internal HD DVD drive." It should also come as no surprise, they've responded "we do not comment on rumors and speculation" to this latest rumor.

While that first dismissal seems pretty unequivocal, you better believe they've considered such a move, weighed it against consumer backlash, price, and demand, before deciding to pursue it. Digitimes says we could expect the new consoles in the first half of 2007 "at the soonest." Let's work on getting that external drive out the door first before we start getting worked up over Xbox 360v2.

The winding road to Xbox 360 v2:
Toshiba man hints at internal HD-DVD 360
Rumor: Xbox 360 getting an HDMI port
Will Xbox 360 games require HD-DVD add-on?
Rumorang: Xbox 360 HDMI cable officially yanked

[Thanks, Stevie and Thyron]

This article was originally published on Joystiq.