Microsoft has very little financial attachment to HD-DVD and has even said in the past that if Bluray "won" they would have no problems making it the format of choice for their next console. Hell, Microsoft's VC-1 codec is now used on many current Bluray releases. Outside of gaming Microsoft and Sony work together on many projects and such. So it's not like they are at each others throats. As far as licensing goes, Sony is fairly open with Bluray technology and probably couldn't restrict MS using the media for fear of antitrust violations. So it is feasible they could use and incorporate the technology.
So could you imagine a Zephyr with the 360's library, Live, a Bluray player with HDMI capable of also reading DVD-9 360 games, and a larger 100GB HDD for about $499? I would get rid of my PS3 for that (and by default my current Premium 360). And to be honest, I don't even think Sony would have much of a problem with it considering that would virtually spur sales and adoption of Bluray more than they thought posssible.
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