"It's a possibility, but it won't have any relationship to gaming," Maruyama is quoted as saying. "If the Xbox 360 uses a next-generation DVD drive in the future, it will only be used for watching movies that run on next-generation DVDs. The format for games will remain as [standard] DVD. That's not going to change."
GameSpot:Video Games PC PlayStation 2 GameCube PSP DS GBA PS2 PS3 Xbox 360 PlayStation 3
This makes more sense to me - as 3rd party developers would likely ignore HD-DVD anyway. Some sort of upgrade or add-on for movies makes some slight amount of sense (although the pricing probably will suck if the evolution of standalone DVD players is any indication).
This would also jibe with the recent interview with Jay Allard over at IGN where he claimed there was no storage problem, that developers needed to work on their compression. This is a garbage claim, in the absence of a HD and an install process. The long and short is any "better compression" you can do on Xbox 360 you can do on PS3 so at the end of the day the PS3 will have something like 3-5 times as much storage as 360 per disc. It's a pretty simple piece of math. So anyway, Allard is blowing FUD at the gullible, but at least it's an internally consistent strategy. And FUD from Microsoft? Act surprised!
I'm still not buying one - and we're 3 weeks from launch.
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