I'm not sure if this is 100% true, but it's from Tom's so take it for what it's worth:
http://www.tomshardware.com/news/xbox-blu-ray-360,5272.html
That's quite a turd, imho, but I understand Microsoft's business movie, as they probably want to blunt the impact of BRD movies on the console war in the coming years...the question is...can they keep the console cheaper and still get this done? I guess a BRD add-on is also waiting in the wings.