Sounding too good to be true, the cats at Teamxbox have posted a lengthy piece quoting multiple sources from Redmond and Santa Clara who anonymously spill the beans on what the Zune HD is and isn't. The "digital entertainment handheld," dubbed unanimously as product "xYz" by said sources to emphasize its purpose of bridging the Xbox and Zune platforms, is not a phone (that's Project Pink) but a converged "mashup" of devices like the Sony Mylo, PSP, and iPod touch. The emphasis of the device is not the hardware but the software, services, and entertainment experience if offers while remaining primarily "a portable game console and media player." It's said to link into Microsoft's Skybox computing services for mobiles and blur the lines between Xbox Live and the Zune and Sky Marketplaces. Even the Xbox 360's NXE interface will be making its way onto the new Microsoft handheld. As Teamxbox summarizes:

Buy a song, a movie or a TV show on your Xbox, play the content later on the handheld or the other way around. Play an Xbox Live Arcade game either on your Xbox or in this handheld.

At the moment, we have no way to authenticate any of this beyond what we've brought to the table already. Honestly, having had our hopes crushed by a tepid reaction to market trends from Microsoft in the past makes it difficult to believe all these seemingly fanboi fantasy claims of specs and convergence. However, if true, if Microsoft finally breaks free from the rigid silos of its own making and delivers an integrated living room, gaming, and portable media experience along with a stable Windows 7 computing environment... well, wait this just can't be happening.

[Via wmpoweruser and SlashGear]

Move over RRoD, it looks like there's a new Xbox 360 hardware failure in town. According to anecdotal data collected by Joystiq as well as Google Trends, there's been a steady rise in reports and discussion of the E74 error since mid-October, with no apparent correlation between any specific model or year of purchase. From what we can tell, the E74 error is related to video problems caused by either a faulty AV connector or, more often, a loosened ANA / HANA scaling chip. Symptoms include visual glitches like random lines or snow and a single red light on the console in the lower right quadrant (see picture). The time frame for the rise in issues makes NXE and its November debut a suspect, but it's worth noting that the uptick started just before that launch, so perhaps it has more to do with hiccups caused by spurred interest in turning on the console after a long period of dormancy. We're curious to know how the issue has affected the Engadget readership. Has your Xbox 360 gotten the Red Arc of Death? Let us know in the poll below.

Read - Joystiq Survey
Read - Google Trends [Via Negative Gamer]

Bad news first: there might be a bit more competition than you expected for that home theater giveaway. Good luck bringing down Netflix's shooting star though, as if last week's good news train wasn't enough comes news that over a million Xbox Live Gold members have already downloaded and activated the Watch Instantly app since its NXE debut last November. That's more than 10% of Netflix's just announced 9.4 million subscribers who've already watched over 1.5 billion minutes of TV and movies through their consoles. They're not the only ones happy, while streaming may be eating into DVD rentals, Xbox Live Marketplace rentals are up 174 percent year over year. The streaming library is up to 12,000 titles, with a "growing percentage" in high definition, for the rest of the celebratory details check the full PR after the break. Nothing left for us to say but congratulations and hey, if you get a minute, could you fix Nilay's HD streaming on the Xbox? Thanks.

Notice something missing from your Xbox 360 ever since the NXE went live? Some HDMI-connected gamers lost all audio after the update, and a fix is finally on the way. According to Major Nelson, it's due to arrive February 3 at 2:00 a.m. PST in a mandatory dashboard update that should address the issues experienced with some HDTVs. That problem with your idiot friend always triggering the witch while playing Left 4 Dead? Still unaddressed.

Netflix seems to be doing things right when it comes to the streaming game, partnering with several hardware companies in an attempt to make its service more or less ubiquitous -- a pretty sharp break from the proprietary hardware approach taken by most of its competitors. That means Netflix subscribers have quite a few choices when it comes to streaming, and we thought we'd put the ones available now head-to-head and try to crown a winner. The good news? There isn't a mediocre choice out there. The bad? Well, read on.

Update: We shot another video to answer some lingering questions about the Roku player, check it below.

It looks like Microsoft doesn't want a repeat of last year's post-holiday Xbox Live outages, when the service was basically unusable for two weeks -- according to 360 product manager Aaron Greenberg, MS is "well prepared for the type of growth we expect this holiday," and that more Live staffers than ever before will be on hand to fix things if things do go bonkers. From what we've heard Live is more robust than ever now that the NXE and the associated backend changes have been rolled out, so we're hoping things go well -- but we wouldn't necessarily say no to another free Arcade game.

[Via Xbox 360 Fanboy]

Now that the New Xbox Experience has been mostly-successfully pushed out, with its avatars, new interface, and updated marketplace, Arcade owners with less than 128MB of storage have been left out in the cold -- and the big M's "solution" of free memory cards wasn't exactly ideal. That's changing, however -- a MS spokesperson confirmed to Xbox360 Fanboy that new Arcade units will contain 256MB of internal memory. So if you've been looking to pick up a new 360 Arcade, feel free to get your Netflix HD on as soon as every last cord is connected -- if you're a subscriber, that is.

We never got a satisfactory answer for why they disappeared in the first place, but it seems the majority of the Columbia Pictures' movies on Netflix Instant Watch lists suddenly switched to "not available on Xbox 360" are once again open for streaming to all devices. The Karate Kid series, Ghostbusters, Groundhog Day and others now stream to Microsoft's box, however Columbia Pictures movies tagged with the "available through Starz Play" logo -- including Bad Boys and Walk Hard: The Dewey Cox Story -- are still out. Hopefully the remaining relevant parties are contacted soon, as Detectives Mike Lowrey and Marcus Burnett have work to do, but this is a great start.

[Thanks, Hunter!]

The path to Netflix-enhanced glory hasn't been entirely trouble free for everyone, this time it's posters on AVForum noticing a distinct lack of audio on Xbox 360s connected to their HDTV by HDMI. So far suggested solutions for the afflicted include plugging in the hard drive while the system is on, or waiting several minutes before switching the monitor to HDMI, and repeating them every time the system is started. It's not the first time we've heard of UK-centric HDMI weirdness, any of you hearing a whole lot of nothing while gaming (that's not attributable to hard drive installs)?

[Via Xbox 360 Fanboy]

Back for more, eh? Well you've come to the right place -- the Engadget Podcast! Join Josh, Paul, and Nilay as they take you on a magical journey through the trials and tribulations of the BlackBerry Storm, investigate the legal situation of the Apple-cloning operation known as Psystar, dish on the latest Zune and Xbox happenings, and lament the forthcoming death of FireWire as it cedes its high-speed throne to USB 3.0. And just think, access to this treasure-trove of information is yours free of charge!

Hosts: Joshua Topolsky, Paul Miller, and Nilay Patel
Producer: Trent Wolbe
Music: Paranoid

00:02:25 - BlackBerry Storm review
00:32:35 - Psystar's antitrust claims against Apple dismissed
00:53:59 - Microsoft revamps Zune Pass: keep ten tracks per month forever and ever
01:02:43 - Microsoft ratchets down pricing on flash-based Zunes
01:02:39 - NXE hitting 360s with red ring, freezing and sorta-sexy-avatar issues?
01:06:45 - Goodbye, FireWire 400

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You probably recall that two days ago, when the new Xbox Experience launched, sadly, about 300 Sony Pictures films were unavailable for Netflix Watch Instantly on NXE, thus quashing your hopes of streaming The Karate Kid series. At the time, it seemed possible that missing titles were due to the fact that Xbox 360 manufacturer Microsoft and Sony are direct competitors. Well, according to a Sony spokesperson, the problem isn't specific to the Xbox, nor is their beef competition-related in any way. Sony also says it is in talks with the several "relevant parties" to work out these vague licensing issues, though there was no word on when the issue would be resolved. We really do hope it's soon because we're dying to see how everything turns out with the Cobra Kai.

[Via Joystiq]

If you wouldn't mind looking up from that avatar creation screen for a second -- yes, we're aware of how much that t-shirt selection means about you as a person -- you might notice that your Xbox 360 is dead. At least, a few hapless souls on the Xbox forums seem to think NXE is to blame for such atrocities. Numerous folks are reporting variously bad red ring configurations, random freezing and a huge pile of blockbuster titles that won't just play themselves. The biggest problem is that Microsoft isn't universally treating problems caused by NXE as an "oh, our bad" sort of situation, and at least from anecdotes we're seeing has charged quite a few folks $100 to fix their freshly-out-warranty Xbox 360s -- not to mention separating them for weeks from their precious murder simulators.

[Thanks to everyone who sent this in]