Reliability, reliability, reliability.

Way better design - Original 360 was ugly as hell and looked like a dell computer. 360 slim is an improvement.

Please get rid of the power brick, there shouldn't be any need for it.

Amazing online, virtually lag free

More powerful, but not a ridiculous jump like PS2 -> PS3

Better exclusives. 360 is really lacking in the exclusive department and the unknown future (in terms of quality) of Halo won't help things. They need some new IP's.

$299 tops at launch (entry model). 1 or 2 models at the most. Something like a 250GB for $299 and a 500GB for $399. And bundle a good game with it like Forza 4 or the a Halo.

Not to mention Microsoft owns some of the Patents for Blu-Ray as well.  

It would be like saying that Microsoft or Sony couldn't use DVD's.  Its a common media now, but I still don't think that Microsoft will add it.  They will probably use some sort of USB thumb drives for distribution.  They can vary the size of the thumb drives in order to save money.  

if it doesnt support controllers, i wont support it

What you listed and controller support. If It's full Kinect I won't buy it.

It's not that they don't own 'it'.  There's just a licensing fee required to use them which brings in massive amounts of money that neither company would deny.  I believe the license fee for manufacturer's to sell blu-ray players is ~$30.  With MS trying their best to sell Zune marketplace downloads they may opt for a different technology to escape these fees. 

The hardware design is easily scalable. I would imagine the update would increase to six or seven multi-threaded PPC CPU cores, perhaps with switchable in-order processing for backwards compat/deterministic scheduling. The GPU is already unified shader arch and could scale easily by adding more/faster shaders without significant backward compat problems. Add to that larger eDram with enough capacity for at least two full 1080p frames and you'd have a contender.

Edit: I also believe that MS will move for full digital distribution with download or USB media transfer.

I've no doubt that's the path they would prefer, though I seriously doubt the international broadband infrastructure is there at the moment.  I think they would be really hurting themselves by not including an optical disk drive. 

i defenitly think they should reset both trophys and gamerscore points next gen other wise there just not valuable the numbers become rediculously high and meaningless

That's a double-edged sword - the loyal fans that have earned big scores may feel upset.  They just need to include a show/hide option for legacy console scores/trophies with the default set to hide. 

They would probably keep a DVD drive at a minimum for BC and movies, it wouldn't surprise me if they had a bluray just for the feature-list, as they will be getting pretty cheap by the end of next year. But I do think that they will prefer DRM locked files over disc media, even if it means going to the store with a USB key and copying it there when you buy a code. Then you could load up at home and register it with the code.