Microsoft is working on a complete overhaul of the Xbox 360 console system. This new system will have an onboard HD-DVD player and wireless adapter, a hard disk of 320GB and a complete hardware revision. It is likely, due to the current preference of Blue-ray discs, the Xbox 360 Ultimate will have a Duel Hi-Def Disc Player that is capable of playing both HD-DVD and Blue-ray discs. Wether this is the result of the current project "Jasper" is unkown. Currently priced at $500 and scheduled to appear somewhere at the end of Fall 2009.
Now Project Jasper is an ADO.Net thing, but there where a lot of XBox 360 Arcade rumours before that was announced so maybe there is a grain of truth in this.