Xbox Live Marketplace
Aaron talked about how XBLM has grown compared to their expectations: by E3, they expected roughly 100 items available, after E3 there's over 1000. They expected 3-4 million downloads by E3, after E3 there's been 24 million. Lower download per item, which is to be expected.
New Media and Entertainment Menu
The upgrade has focused content into groups. Despite promising categories like "Television" and "Short Films" there's been no announcement of additional content to populate them. DirecTV maybe?
The popular iPod AAC plugin has also been placed "near the top" to streamline that process.
The Games screen now has a "Newly Released" section, so new additions to the Xbox Live Arcade, or new game demos, can be quickly located and downloaded.
Demos and Game Videos
Themes and Gamer Pictures
New Background Download Manager
View Active Downloads
The single most requested feature: background downloading. As detailed earlier, you'll have a queue ...
Manage Up To 6 Downloads
... with up to six download slots available. You'll be able to use the console as usual while downloading; if you take a game online, the downloads will pause until you're done.
Downloads are Easier to Find
Trailers has become Game Videos. In addition, you'll be presented with options upon completion of a download: play now, apply theme now, etc.
Fast Forward/Rewind All Downloaded Marketplace Videos (2X-16X)
Simply play/pause functionality when playing back downloaded clips was another major annoyance. Glad to see this has been added, even if this sort of functionality is really basic.
Music Player & DVD Playback Improvements
Although the CD player previously queried the internet to populate artist/track information, Greenberg assures me this functionality has been improved. The major enhancement is that the custom music you're playing -- whether from an iPod, CD, HDD, or network share -- will stay consistent as you switch from one console function to the next. No more tracking down the playlist you were listening to and starting over.
The DVD player also supports bookmarking now; if you're watching a movie and receive an invite from a friend, you can replace the movie disc with a game and return to the same spot in the movie when you resume it.
General Usability Enhancements
Similar to an instant messaging client, you'll be able to set your status as away (red) when your console has been inactive for a certain period of time (15 minutes).
There will also be "full" USB keyboard support ... goodbye clumsy text entry, hello wireless USB keyboard!
New Startup Feature - Launches Direct to Dashboard
Another major feature request, especially those that use their console as a media center extender. Instead of automatically booting into whatever game is loaded in the drive, you'll be able to set your console to boot into the Dashboard by default.
You'll need to have your Xbox 360 online and an Xbox Live account to download the update (it takes "less than a minute"), but it won't be available to burn to a CD ala backwards compatibility updates. They plan on eventually bundling the update with retail game discs for those of you without an online console.
Greenberg was quick to note that previous updates have either been one-off game-specific updates (like PGR3) or security-related updates (like that mysterious one in March?). As for when to expect it, considering Major Nelson's earlier warnings regarding demos not being made available on Fridays (as they're unable to observe potential errors), we're guessing it won't be next Friday but the week of the 5th. There will be a list of all additional features on Xbox.com in the coming week.