Microsoft showed at their E3 2006 press event the HD DVD drive accessory for the Xbox 360.

The HD DVD drive will come in time for this Holiday shopping season. Microsoft has not announced the all important price of the HD DVD drive for the Xbox 360.

There is also no additional information on the HDMI/HDCP situation.
Apparently 150 HD DVD titles are supposed to be available in time of the Xbox 360 HD DVD drive release.
The Engadget team has attended a Microsoft party after the press event where they could sneak out some live shots of the Xbox 360 HD DVD drive. Nothing exciting to see, it is an external drive with no gimmicks.