[Update] Microsoft has dispelled rumors of a new HD DVD drive coming out for the Xbox 360 next year, despite earlier reports. Apparently, Microsoft's Mark Bennett was misquoted.
PC World UK is reporting that Microsoft plans to launch an updated HD DVD drive for the Xbox 360 in 2008. The announcement was made in London by Mark Bennett, Microsoft's European business development director for HD DVD.
The original Xbox360 HD DVD drive, launched in November 2006, is fully compatible with Windows Vista and currently sells for $179.99 after a $20 price drop last month. Additionally, any purchases made between August 1st and September 30th will include five free HD DVD movies. Details on the new HD DVD drive are scarce at the moment; perhaps they'll include a video and audio decoder chip to lessen the burden on the console.