M$ screwed up by not having at least on of the following built into every 360.
A 20gig+ Hard Drive
A HD-DVD Player
A Blu-Ray Player
If they had at least one of those in every 360 then developers would not have to worry about the constraints of a DVD.
I know, I know, some of you will say HD-DVD is dead. That is true for movies, but if M$ had built it into the system the format would not be dead for games. It would just be a 360 exclusive format. (Just think Nintendo DS. They have their own format.)
If each system had a HDD then games that are larger than one disk could save parts of the game onto the HDD, like some PS3 games do.
Well... I doesn't matter this gen, for M$. There is no way that M$ would allow retail games to require that the consumers have at least a HDD or Blu-Ray to run a game. But they may allow online only portions to require it (ala Burnout.)