Engadget scored some scoop and a photo of a new Xbox 360 console.

In April last year first reports appeared that there is a new Xbox 360 CPU in the works with 65nm. The new Xbox 360 has apparently the codename Zephyr and is sporting a HDMI port. A 120GB hard-drive is supposedly also part of the new Xbox 360.
If Microsoft is also integrating the HD DVD drive (or better a dual format HD drive) then the Xbox 360 hardware would be on paper better or as good as the Sony PS3.
They big unknowns are the price and when Microsoft is going to launch the updated Xbox 360.
More Xbox 360 News.