Funny you should bring this up.
Since the Xbox is my favorite of the current-generation consoles, I've been keeping a keen eye on any news regarding its successor.

The more I read on it, the worse it gets, IMHO.

If you ask me, backwards-compatibility is going to be one of the key factors in the next set of consoles, and it already looks like that is all but out of the question for the next Xbox.

No hard drive: This has yet to be officially stated and may change, but the rumours are that MS is opting to use 1gb-3gb flash rom in lieu of a hard drive. I'm not liking this for a number of reasons: First, it guarantees there will be no backwards-compatibility. Second, many features which I felt gave the Xbox a hardware advantage will no longer be possible. Ripping your own music & using it in-game (which is beyond cool), content download (which still may be possible using the flash-rom or memory cards, we'll see), faster load times. Apparently Sony and Nintendo make some decent change off the sales of memory cards, & MS would like some of that extra income, and removing the HD would certainly guarantee that, not to mention the lack of a hard drive would lower the production cost of the system. The PS3 is going to have a hard drive, and reportedly make more use of it, and I honestly think that omitting the hard drive from the next Xbox might be a mistake. Besides, how expensive are 40gb HD's these days? Certainly they must be pretty cheap by now.

No more black & white buttons: According to this article, http://www.gamespot.com./pc/rpg/sacr...s_6090293.html
the black & white buttons will be taken out of the next Xbox controller. No biggie, I don't think that many games make good use of them, they're akwardly located on the controller, but if these buttons are taken out, that too will make it harder to enable backwards-compatibility.

A few other things to mention are that most of the development team that designed the original Xbox have since left MS, and I think that the original team was sincerely trying to make a system to cater to a gamers needs. They tried to think of every conceivable tool and feature that would make not only game playing more enjoyable, but easier for developers to work with and make games for. We can only hope this new team has those same goals in mind.

I don't know, the more I read bout it, the less I like it. Of course, it's all rumous & speculation at the moment, but one has to think that at least some of these are true. I'm going to reseve final judgement until the final product is revealed or released. At the time of the original Xbox, I thought that a HD in a console was blasphemy, but now, I think it's the greatest thing since slived bread. Go figure.