Today a report surfaced on Australian technology website iTWire suggesting that Microsoft would eventually release an Xbox 360 that has been revised to include an HD DVD drive internally. As you probably know, Microsoft currently has plans to release an external HD DVD add-on for the Xbox 360, although an exact price and launch date have yet to be announced.

What lends some credence to the report, however, is that it's Toshiba (the folks behind the HD DVD format that's competing with Sony's Blu-ray) that believes Microsoft will be going the internal route. In fact, the article claims that a senior Toshiba executive has predicted that Microsoft will release an Xbox 360 model with an internal HD DVD drive before the end of the year.

"I would imagine that there are plans in place to put an HD DVD drive internally in future revisions of the product," said Mark Whittard, general manager of Toshiba Information Systems Division in Australia. "They're not speaking about it publicly at the moment but I would expect them to do that and fairly soon."

GameDaily BIZ took these claims straight to Microsoft to see what kind of official response the company would provide. Interestingly, Microsoft chose not to issue a standard "we do not comment on rumor or speculation" answer. Instead, the company flat-out denied that any such plan for internal HD DVD is in the works.

"At E3 we showcased our Xbox 360 HD DVD player that is an external drive. Since launching Xbox we have retained a games first emphasis, but we also offer consumers the ability to build on our powerful platform, such as in combination with a Windows Media Center Edition PC," a Microsoft spokesperson told GameDaily BIZ. "We feel that offering the drive externally is the best way to give consumers the ultimate choice to create their own high definition experiences. We have no plans to release the Xbox 360 with an internal HD DVD drive."

Although it's certainly possible that Microsoft is covering its tracks, we tend to believe them on this one. After all, if they actually did decide to include HD DVD internally, what would happen to the 10 million or so Xbox 360 owners that are already out there? What if this drive also played HD DVD games? Microsoft would be wise not to split its own user base that way.

Furthermore, people in the last few years have finally gotten very accustomed to traditional DVD, and the uptake for both HD DVD and Blu-ray is likely to be quite slow. Releasing an external HD DVD drive as a cheaper alternative to standalone HD DVD players seems like a smart move in this editor's opinion.