Source: An interview with Microsoft Japan's Xbox operations chief Yoshihiro Maruyama in Famitsu Xbox.
What we heard: One of the biggest hardware shortcomings detractors have pointed out about the Xbox 360 is its reliance on the standard DVD format for its games. In August, Japanese developers weighed in on the system, with From Software producer Masanori Takeuchi lamenting Microsoft's decision to go with DVD as the standard system format. Takeuchi said that his Xbox 360 launch title Enchant Arm had already swollen to two discs and might even need three by the time it ships.
Bill Gates commented in June that the Xbox 360 might be upgraded in the future with an HD-DVD drive, something that would technically allow the system to run games off the higher-capacity discs. However, Maruyama indicated in the interview that the disc format would be used only for movies and not for gaming purposes.
"It's a possibility, but it won't have any relationship to gaming," Maruyama is quoted as saying. "If the Xbox 360 uses a next-generation DVD drive in the future, it will only be used for watching movies that run on next-generation DVDs. The format for games will remain as [standard] DVD. That's not going to change."
While it seems odd to add on hardware that could benefit game developers and then disallow them from using it, Microsoft might have good reason for it. Introducing an HD-DVD-equipped Xbox 360 would create at least three (and possibly four, if it came with or without the hard-drive add-on) significantly different hardware setups for developers to work with. Microsoft has already indicated that it wants every Xbox 360 game to play on a no-frills core system. While that simply won't be possible for some games (like the massively multiplayer Final Fantasy XI), it's understandable that the company would want to limit the number of different hardware configurations on the market, both to make things simpler for developers and to reduce confusion on the part of consumers.
However, if consumer confusion isn't that big a concern for Microsoft, there's no reason why publishers wouldn't be allowed to release games on both DVD and HD-DVD, much like PC publishers currently offer some games on both CDs and DVDs.
Bogus or not bogus?: Xbox Famitsu is certainly reputable, Maruyama would know better than us what Microsoft's ultimate plans for the 360 are, and the case can be made for having an HD-DVD without HD-DVD games. This one appears not bogus.