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All those people advising the devs to make XBLA games need to listen to common sense, not MS reps.

First of all, there is a size restraint on XBLA games, a reasonably limiting one I believe
Second, If you're aiming at the casuals, XBLA release is ludicrous. Arcade model doesn't have a harddrive, and many casual gamers would not buy downloadable games.

Anyway, only a rumour at this point