A five-year-old console repackaged with similar graphical power and new fangled motion control? And compatible with the predecessor's entie library, too? That'd never work.

It sounds nice but it might lead to disaster. It is still unknown whether the RROD problem for 360 has been resolved, so a slimmer design might just cook the 360's insides from all the trapped heat.

Indeed. Definitely needs more duct tape.

Seriously though, I think NATAL could be a great breath of fresh air for the system, and with a console redesign, Microsoft could really push the idea of a brand new 360 to the public.

Well...In an unconstrained fiscal environment, sure, a redesigned Xbox 360 would be great, but I would much rather prefer that M$ dedicate as much of the hardware funds to upgrading the console, rather than aesthetics. 

I'd like to see a combined CPU/GPU to reduce heat and power consumption

More HDD options or provide a Card slot for flash memory.  This would add questionable cost to the console, so perhaps the better option would be to instantiate the use of Portable HDD into XBL.  I understand the desire to ensure paid content is stored on the internal drive, but c’mon…free stuff?

M$ can’t really boost the internals of the console, since they need to ensure parity with older consoles, so if you give developers more options by boosting cache memory for example, they will push the games out of the range of older consoles…but with that said, M$ CAN do things, like stick a DVD drive that uses less power for example.

At its core, M$ is a software company, and they need to work to stream-line the OS for the console to improve its efficiency in getting things accomplished.

Maybe add more ram while they're at it. It's gonna need it with the scale of games that are coming.

Would be great to finally off that ferkin' brick!

M$ is a SW company, like many others have said, and it would be much harder and more expansive to produce than it was for SONY as they are a massive HW company.

I think M$ will try it, tho as they love to follow SONY. There are lots of hurdles like heat, power brick, RROD etc, etc that they will need to fix.

It may happen. The Valhalla CGPU chipset is coming next year as well so it is a definite possibility. Not to mention the 360+ rumors from a couple of months ago.

Sega was slimming consoles long before Sony even thought about entering the market.

Why o why is Sony copying Sega pattern? 

For some of you it's like if gaming didn't exist before the ps1. Let me guess, born after 1995?

Didn't the 2600 even get a slim redesign (as in the official system, not revival all-in-one systems)?

Indeed it did - just checked the wiki.