My transfer speed is 1.04 mbps, and still its a drag to download full blu-ray movies, which are around 4-8 GBs

Every dollar a 360 owner would have spent on HD-DVD movies for the console would have been dollars that could have possibly been spent on games. In that way the HD-DVD movies would have been competition for them and unlike those offered on Xbox Live, Microsoft wouldn't have gotten much of a cut of the profits.

Was it just a pawn for their streaming technology that was in development? Maybe we'll find out someday but for now it's all just speculation and probably isn't worth the effort being put into discussing it.

Blurays are 25-50 gigs. :D

Just to make it clear.... my point was that MS invested in HD-DVD to keep Blu-Ray from winning hands down -- just long enough to give them some time on the DD model.

For those of you that don't think it is close, perhaps you didn't see this link yesterday -- check it out. You have to let it play long enough to stabilize, but it is pretty damn good. I've watched it on my 8' projector and it is awesome.

http://www.iis.net/media/experiencesmoothstreaming1080p

It's possible that it was just a stall tactic by not going full boar with it. It certainly would have changed the game had it been standard in the 360 that's for sure. I don't think the cost impact of adding it would have been as bad as Blu-Ray implementation on the PS3 as the HD-DVD players were noticeably cheaper at their launch, but it probably still would have been a big financial hit at the time the 360 launched (or was in development).

I don't think they intentionally want it to fail but they probably don't care much to invenst into it beyond what they did. They only support it just to have a bullet point that 360 can play HD movie format.

I think HD format could really have taken off much earlier without this format war nonsense.

They only supported HD DVD in order to stop Sony and Blu Ray. And they failed

Bill Gates is and EXTREMELY shrewd business man, however, I don't think he would take a huge risk like the one the OP mentioned

I don't think there was a huge risk.  MS turned up at a few HD DVD events, gave modest support compared to the ardent HD DVD backers, and supplied a fairly low cost HD DVD external drive.  Hardly a big risk IMHO.  For them there was no downside, no risk to their business and the chance to really hurt a key competitor.  I'd say backing HD DVD was a very appealling move - and one that for MS was a win/win as whichever way it went they gained something.

In the end they perhaps gained the weaker option, with BR winning the format war but with its adoption slowed considerably while MS consolidated its own position and grew its DD capability.

I do think they would have been happiest to see both formats fail, though.  Again, this would only have benefited MS and they would have lost nothing in the process of backing HD DVD for a while.

All MS had to do was to delay Blu-Ray long enough for the stand alone players price to undercut the PS3.