Sure, this is bad news for early adopters of the 360. But isn't this the case w/ all new technology these days? Computers, TV's, and iPods are constantly updated. Maybe this is the first of many updates on all consoles. If only Nintendo could find a way to update the Wii graphics to HD w/o building an entirely new console. It'll never happen, but I can dream right?
As for the 360 update, I'd rather drop $600 for a PS3. Let's be real here, Sony will win this race.