Microsoft has gone out of their way to say they aren't going to bring out a Blu Ray 360, and this from a company that "does not respond to rumours or speculation"
I don't believe in the x-mote and at this point consider it a rumour.
In my opinion, Microsoft games division is loving life and won't change much.
They have made some money
Sony is no longer dominating, hence they're less of a threat to Window's doominance of home entertainment
The 360 will outsell the original xbox soon