Sounds dubious to me, especially since 360 games already run at 1080p, why would they announce a processor that runs at 1080p and say that their old one ran at 720p when that's a lie?

Regardless, they announced more or less that Natal would work with existing Xbox units, in the Milo demonstration there is a running developer 360 right beside the TV.

I think it's all rumour and speculation.