Ever since the death of HD-DVD, the Blu-Ray/Xbox 360 rumors just won't die. This one, however, comes with a bit of credibility. Please note that I said, "a bit."
A Chinese company is claiming that it has won the order from Microsoft to provide built-in Blu-Ray drives for Xbox 360's to ship in Q3 of this year.
Of course, Microsoft won't confirm anything. That's why it's time to SPECULATE!!!
Would you buy a 360 with a Blu-Ray drive? Odds are it would only play Blu-Ray movies. There's very little chance that it Microsoft would use Blu-Ray's for their games. It's more likely that it'll be an external add-on.