If Brier Dudley of the Seattle Times is to be believed (he seems like a nice enough fellow), Microsoft is not only poised to release an Xboy this Christmas, but will have it interacting with Xgirl, Xuncle and Xred-headed step-child, the latter of which will probably prove a formidable challenge to market. All part of Project Argo -- the name of the warship that carried Greek Mythology's Jason around -- the project jokingly dubbed Xboy seems to be a full attack on that popular, more fruitful music player and it is likely to be waged on multiple fronts. As Mr. Dudley writes, the project "being developed is actually a complete line of Xbox-branded digital-media products, including a device that plays media, a software media player and an online media service."
Under the leadership of General J. Allard, the branded media players will go to war with the iPod, the DS and the PSP with Wi-Fi at their disposal, as well as the backing of music companies, online media services and presumably, blitzkrieg marketing tactics. The article also mentions the support of the touted XNA platform, no doubt paving the way for easy support for existing Microsoft platform games.
What you can take from the Seattle Times article is this: Microsoft is pushing hard to release a killer portable device this Christmas, one complete with Wi-Fi capabilities and an online X-tunes service which may very well be home to familiar games and properties. We can only pray that the inevitable portable version of Halo isn't dubbed Hago.