Because Microsoft is doing a complete revamp of the Xbox 360 layout both inside and outside it would make sense for them to update the specifications/features to keep the machine current for the rest of its lifespan.

General features

Memory card slot: I expect these to go and be replaced by an SD card reader. Heres an example of SD memory for $20 which holds 8gb of data on Newegg. Within a year this should scale to 16gb easily for the same price and allow people to play Arcade games etc and further their Xbox Live ambitions. If attached to an online username, it could allow people to make their downloaded games collection much more portable between consoles. This is especially important on the Arcade SKU.

Hard disk drives: Theres a chance that in reducing the size of the console, they will choose to remove the external HDD and either go for a user-replaceable or non user replaceable HDD to allow them to change both the height and the depth of the console. Because otherwise the potential size of the console would be limited by the current external HDD attachment.

Disk Drive: It would be easier to make the console a slot loader, especially with a reduced frontal area of the console. It will also help them redesign the whole of the front area of the console.

Console front panel: It would make sense for them to switch to piezo electric button like the PS3 because of a reduced frontal area to help keep things in proportion.

Networking features

They will make Blu Tooth standard. A lot of accessories are being made which are Blu Tooth only such as headsets, remotes and its becoming a strong standard so it makes sense that they will make the 360 compatible. It will also allow them to remove the IR port as it was only really used for a remote which is hardly used anyway.

They will also add wireless to every SKU and allow them to form an Ad-hoc network if required. They will make it A/B/G compatible with N support possible as well, depending on the cost of implementation. Wireless is becoming more and more common in peoples homes so its becoming more important than ever before to implement it. Furthermore they can use wireless to improve the user experience of the console by allowing two or more to LAN locally and so therefore improve the local multiplayer experience, which is a very important componant of the overall package. It will also allow people to share movies, music etc between Xbox 360 consoles.

Price/Conclusion

Arcade SKU $180-$200 (With 4-8GB memory card)

Premium SKU $250 (Perhaps with larger HDD)

Elite SKU $350 (Perhaps with larger HDD)

I don't expect them to reduce the price significantly next year. They are more likely going to attempt to leverage the new Xbox experience and attempt to broach to a larger market. Whatever they do with the Nextbox, they need the Xbox 360 to remain current and profitable to support their future consoles. If they choose to go down the route of providing a unique Wii type or vein of interface they need the Xbox 360 to fall back on incase they fail and to catch the portions of the market which could be disenfranchised by a potential change in control scheme (if it happens)

So what do you think?