There may have been a good reason for that wide beta test Microsoft ran to test out its new disc format for the Xbox 360. While it will allow for an extra 1GB of storage space for new games and (it hopes) stop piracy, apparently some consoles contain drives that cannot read the new XGD3 discs. The details can be seen in the email pictured above posted by Reddit user Avery Penn and were verified as real by the Xbox Support Twitter account, but now it's responding to inquiries by saying the replacements are in response to a previous update and not the upcoming one that has been in beta. Adding to the confusion, Microsoft Europe confirmed the initial report and points affected users towards the support page to get sorted out. One way or another, affected owners can expect to be mollified by getting their Xbox 360s replaced with new 250GB Xbox 360S models plus a free year of XBL for the trouble. We haven't gotten an official response about the plan yet but are still checking, so your plan to hoard old consoles and get free replacements en masse is probably equal parts premature and Seinfeldian genius.
Update: Microsoft has responded, confirming that the earlier statement was incorrect and this is not related to the update being beta tested. If you're wondering how many people are in for a swap, all we could find out is that something less than 10,000 of the 50 million or so Xbox 360s sold worldwide are affected. Check after the break for the official word, but if you have one of the boxes and are connected to XBL you should expect to receive a notice in your email.
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Following a recent update to our system software, we have become aware of an issue that is preventing a very small number of Xbox 360 owners from playing retail game discs. This issue manifests itself as a unique "disc unreadable" or "disc unsupported" error on the screen and is unrelated to our recent public beta. We are also able to detect this issue over Xbox LIVE and are proactively reaching out to customers that may be impacted to replace their console. Any Xbox 360 owners receiving this error are encouraged to contact us at www.xbox.com/support/contact so we can verify if the console has been impacted.
This disc read error message is tied to a change in the disc reading algorithms in a recent software update and is not specific to older or newer versions of Xbox 360.