It would be the smart thing to do. Sure, it may raise the price of the next console, but theres no doubt that Blu-ray is becoming the new standrad. If Xbox wants to compete in the multimedia department, then it will have it.
I really don't see any glaring problems with Oblivion. If anything, I think more body language by characters when they talk, a more streamlined inventory, and a multiplayer for the Arena (you know it would own).
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