The folks at newlaunches.com have heard from sources in Taiwan that Microsoft is working on a new generation of Xbox 360′s with built-in HD-DVD drives. As many of you already know, Microsoft plans on releasing an external HD-DVD drive for current Xbox 360 owners sometime this holiday season. The new Xbox 360 consoles would be designed to compete against the upcoming PS3 which will have a built in Blu-ray drive. Assuming Microsoft finds partners to build the system, the new consoles could hit the market by as early as the first half of 2007.

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