X360 with internal HD-DVD?

Microsoft has started work on a new Xbox 360 that comes equipped with an internal HD-DVD drive, according to a report.

Yes we're back to this again - with DigiTimes claiming that the company is "selecting manufacturers in Taiwan to build the [internal] drive", and quoting unnamed sources within the local optical disc drive industry.

Unfortunately it turns out "Microsoft doesn't comment on rumour or speculation", so they've nothing to say about the report's claims that an HD-DVD-equipped 360 could be ready to go within the first half of 2007.

And there's certainly been a lot of rumour and speculation to comment on lately, not helped by their own pals in the HD-DVD gambit - as in June, when Mark Whittard, general manager of Toshiba's Information Systems Division in Australia, said, "I would imagine that there are plans in place to put an HD-DVD drive internally in future revisions of the product."

Microsoft has been adamant, however, that it was committed only to an external HD-DVD drive - believed to be set to retail for £199.99 in the UK this Christmas - and that the drive would not repeat not be used to play games in any capacity, unlike Sony's competing Blu-ray format, which is one of the key pillars of the PlayStation 3 offering.

There's been chatter about hardware revisions to Xbox 360 in the past, however, including one report, complete with fuzzy picture, that claimed Microsoft was working on a new version of the console with an HDMI port built in - something that, Microsoft happily informed us, was nothing but "rumour and speculation".