imagine the size of the fan you would need to keep it from RRoD'ing - an entire wind tunnel i'd think.

@OP - I think this is great.  I'm really pissed off at MS right now so i would love to see their xbox division be unprofitable again and loads of resources taken away from the 360. xD

I've been hoping for this for a while, but I don't think the portable market will be near as easily cracked as the console market was....

If its as powerful as an ipod touch but with a keypad it might have a chance.  The ironic thing is it will likely cost more than a 360.    They should also try to exploit the XBLA market and sell $10-15 digital downloads.

If it can link in with the 360 for some games and all, it could sell really well.

I've been saying this for a while...now that the zune is on solid footing, M$ can relaunch a zune for gaming...sure enough...a zune for gaming. I was looking at the 32gb iTouch, but the limited space made me blink, soif this has a card slot, I'll be interested.

Should be interesting to see if its true.

 Really? The iphone is more powerful than the DS, and slightly less powerful than the psp, when it comes to gaming, I think the iphone can handle anything they put on the DS...and most of what they put on the psp.

This will be awesome if and only if the DRM for those titles can be shared between the 360 and this new device.  As awesome as those games were, I'm not paying for them twice.

Balmer is only gonna talk about Windows 7. Maybe someone from the Zune team or Danger will talk about the Zune Phone. I think that a device that plays arcade and community games would be ideal.

i prefer to be called XBOX portable...