Assuming the mouthpiece behind this piece of chatter, we'll have to take this all with a grain of salt. However, IT Wire in Australia has spoken with Mark Whittard, general manager of Toshiba's Information Systems Division in Australia, about the possibility of an internal HD-DVD drive making it into next generations of the Xbox 360 before the end of the year. He is quoted as saying:
"The Xbox  is coming out with an HD-DVD player towards the end of this year. ... I would imagine that there are plans in place to put an HD-DVD drive internally in future revisions of the product. They're not speaking about it publicly at the moment but I would expect them to do that and fairly soon."
It can be hard to imagine this becoming a reality, unless production costs are reduced dramatically sometime soon. Considering the flack Sony and the PlayStation 3 have received as far as pricing with their costly Blu-ray drive included, to have the 360 price stay the same or even inch a bit higher wouldn't be the most prudent business decision. Besides, who really needs an HD-DVD player anyway?
[Thanks, James, via Eurogamer]
[Update: GameDaily Biz spoke with an unnamed Microsoft exec who said what Toshiba's Whittard is saying simply isn't true. They quote him as saying: "We feel that offering the drive externally is the best way to give consumers the ultimate choice to create their own high definition experiences. We have no plans to release the Xbox 360 with an internal HD DVD drive."]