Our friends over at technology blog Engadget have been informed by a "very kind Xbox insider" that a second iteration of the Xbox 360 console is in the works and that this new model has been codenamed "Zephyr" as opposed to the current model's original codename of "Xenon."

The report suggests that the new 360 will come with an HDMI port so that gamers and movie enthusiasts can finally hook up the console to get full 1080p resolution without worrying about digital rights protection getting in the way. The new model will also feature the improved 65nm processor, which should allow the system to run a bit cooler.

The HDMI-enabled console might also come with a significantly larger hard drive of 120GB, but that's apparently not determined yet. People have been clamoring for a larger HDD than the standard 20GB version, especially with the recent launch of the Xbox Live Marketplace movie and TV show download service.

Check out the supposedly un-photoshopped image of the HDMI-enabled console below.

GameDaily BIZ has contacted Microsoft for comment and will update when we hear back.

[UPDATE] A Microsoft spokesperson has issued us the usual "We don't comment on rumors or speculation."

[UPDATE 2] Microsoft has followed up on its last statement and provided us with the following: "We have seen all types of claimed leaked photos like this show up online and as a standard policy we don't comment on speculative items."