I found some other info today that got me wonder whats the source of this...
QUOTE(XanTium @ Jul 31 2005, 10:44 AM)
as far as I know the Xbox 360 can not have a digital video output. The design of the ATI R500 Xenos GPU hasn't been made to have any digital output.
Any move later in the game to put Blu-ray or HD-DVD into 360 would be really bad, because there'd be people who would feel shafted out of high def movie playback because they bought the 360 before they put this stuff in, external addons or whatever won't work, add-ons don't normally do so well, developers would have a "why the fuck?" look on their faces at the sight of a new drive placed into 360's because there are some out there that would have wanted a next-gen optical disc with large amounts of space for their games rather than the current DVD.