Some info from News.com's rumor mill... interesting info though we are still a few months away from E3...

Game rumor sites have been rife with reports that Microsoft will unveil a new version of its Xbox video game console in May at the Electronic Entertainment Expo (E3) trade show.

Anticipated changes are entirely cosmetic, with the new Xbox supposedly sporting a smaller case and sharper edges, making it look more like an entertainment appliance than the construction materials it's often been compared with. So far, no one has claimed to actually have seen the thing, and Microsoft gives it's usual "we don't comment on rumors" response, but there is some logic behind the speculation.

I think for the XBox the time is now to change something and get their sales back up. E3 would be the perfect chance to do that as well. HUGE expo where all the newest gaming things comes out.
If I were M$ I would have been working on this for a long time sinve their current XBox is performing WAY under par.