http://www.beyond3d.com/content/news/396

However, the most likely possibility is the introduction of a cheaper version of the Core. Microsoft's Shane Kim has said that the Core will not be discontinued and that the 360 must reach $199 in order to penetrate the mass market. What this means is that the Core in its current form will probably be phased out and replaced by a new, fully 65nm Core model that costs Microsoft much less to manufacture. That version of the Core will then become Microsoft's entry into the $199 market.

Hmm, definitly seems like it is true. This could be a good move for ms. 

def a good move O.o but only time will tell

This would be a super move for MS, and may get me to buy one. I don't need the HD, I have plenty of other consoles and a PC.

 You do realize that you'll still need to get some sort of memory for it.  Also, the rumor is that there are games coming out that are going to require a hdd.  What I'm trying to say is that MS should kill it off.

This is total speculation. Shane Kim said this about getting the price to 200 quickly, but why drop the price of the core now to 280 and then re introduce it at 200 soon after?

I personally think this isn't happening. Either it gets phased out or it just gets price drops to 200 as normal with time.

QFT, with the extra money you end up spending to make the core a viable system most people have realised just how bad of a buy this is. Sure they still sell to grandma who doesn't know better, but the gamers are not really buying core systems. Discontinuing the core is by far the best move since you don't really get but a small fraction of the full 360 experience with it.

Now, IF they do move the core down to $200, it will definitely attract the attention of the mass consumer. But I think one of two things happens:

1. People realise quickly they aren't getting much for the price compared to a fully equipped 360 and the efforts to revamp the model are wasted
   
2. People become angry as they feel they are being forced to continually pony up $50 here and $30 there to make their core system worth using.

I think PS2 and Gamecube owners are used to being nickel and dimed on accessories like memory cards. If these folks were to buy a Core system (it would have to be the right price point to attract them), they wouldn't feel ripped off. And remember, Wii owners don't have an option to buy an HDD version. They have to buy either a memory card or SD card to save their games, but this is considered acceptable.

You are missinformed, Wii comes with storage space to save games...lots of games. And anyone who has a flash card gets even more space to store games or import pictures.

Edit I currently have a little over 1700 blocks left and madden takes up 13 blocks.  All of my other games take up 1 or 2 at most. Then on top of that I have a 2GB SD card which has another 15,709 blocks to save even more stuff.  But I doubt I will ever really need the SD card unless I really get heavy into DL'ing games.