I would just like to dispel a few misnomers going around.
360 games can use dedicated servers. Forza 3 does. L4D does.
360 games can have consumer hosted servers. It is called XServer. Section 8 allows this.
360 games can have user generated content. Forza games do, Halo 3 does.
There has been free DLC. Forza had some, Burnout had some, L4D had some.
And yes, this developer was speaking about the services MS provides for online functionality.