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Microsoft has internal HD DVD Xbox 360 in the works?

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Yeah, yeah, we've heard this plenty of times before, but one more time couldn't hurt, right? DigiTimes is reporting that Microsoft is hard at work at a second-generation Xbox 360 with internal HD DVD capabilities, and is currently selecting manufacturers in Taiwan to build the drive. Of course, they haven't even gotten their external drive out the door yet, so it seems just as likely to us that they're searching for another manufacturer for that drive. If this does pan out, DigiTimes is saying the internal HD DVD Xbox could be out as early as the first half of 2007. We're not holding our breath, but we can't say the idea of a souped-up (or maybe slimmed-down?) Xbox 360 doesn't appeal.

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