MS would probably be best off using a proprietary disc format, maybe based off HD-DVD to reduce instances of piracy while providing additional space for programs that need it.
The only reason for going with BD would be the convenience of using an established higher data density optical format at the cost of licensing fees for the proprietary format.
Not that it matters, but they've already been so stubborn on the BD issue, flipping a 180 by using it would be like announcing a retraction on something they already declared as final.
If they stick with DVD for the next generation, then they are being even more stubborn on the storage issue in addition to ignoring changes in developer demands for more storage flexibility.
As for an all DD console to skirt the storage issue; best not to try this in 2012 or whenever Xbox 3.0 is set to debut. It would be a disaster by cutting off all potential consumers who don't game online (shrinking, but still relevant %).
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