Eh. Not quite. It's not confirmed.
Honestly? I would assume, more than anything, they're just trying to kill off the current core system. If anything, MS could desire to re-launch the core once Falcon is out, and maybe intergrate a small USB-derived HDD, and keep the price near the Wii level.
Either way, consumers win. I do think that MS will keep it, but might just be readily trying to phase out the current core in favor of a more meaningful unit, as most consumers (as stated) do own HDDs. With Rockstar and other developers clamoring for HDD-only games, they might as well intergrate a 1gb flash memory card. This would be expecially wonderful for Halo 3 owners that need a basic HDD to re-play Halo 1 and 2 with BC.
Back from the dead, I'm afraid.
