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Microsoft doesn't need blu-ray, but they do need a larger storage medium.
By the time the 720 is out there should be a great deal of $100 or less blu-ray players on the market (there are already quite a few in the $150 range) and people will have those as options besides the $300-$400 PS3.

One of the main reason for PS2's sucess was the inclusion of the DVD player when the price was still high, but that is not the case anymore for Blu-Ray, and won't be the case when the 720 is out either. MS does not need a blu-ray player.



It's just that simple.