A Financial Times story on the rumor that Microsoft will be working on Blu-Ray for the 360 might not hold as much water as the fan boys wold like to believe.
I'm not going to blow a bunch of smoke up your butt and tell you that it will happen and I'm not going to say that it will never happen but what i will do is tell you what i know so far.

Financial Times reported that:
"Sony is in talks with console rival Microsoft about offering a Blu-ray drive for the Xbox 360, according to a senior executive."

"The Japanese electronics maker has until now touted Blu-ray as an advantage its PlayStation 3 holds over Microsoft’s console. Microsoft has backed Toshiba’s HD-DVD format and offered an HD-DVD drive that can be plugged into the 360."

"But after Sony’s victory last month in the high-definition DVD format war, Stan Glasgow, Sony Electronics US president, said the two sides were now talking about Microsoft adopting Blu-ray."

"A Blu-ray drive in a 360 would make Microsoft more competitive with the PS3, but it would also mean extra revenues for Sony’s electronics division. It would also add further cost to the 360, meaning a premium edition of the console could be necessary."

"A Blu-ray drive could be incorporated in its top-of-the-range Elite Xbox, or Microsoft could again offer a drive as a plug-in peripheral."

"Mr Glasgow, speaking at a media dinner, added that discussions were also taking place with Apple, which has not offered Blu-ray drives on any of its computers so far and has focused on digital media via downloads and streaming through devices such as its Apple TV."

"The Sony president said he did not believe Blu-ray would be overtaken by high-definition content becoming available over the internet. Bandwidth limitations meant it was still available to only a few, he said, and consumers favored disks they could own."

“Downloading will build over time, but this will be over a period of years,”

And as always Microsoft declined to confirm any talks, saying: ”We have made no such announcement. Games are what are driving consumers to purchase game consoles and we remain focused on providing the largest library of blockbuster games available.”

Next-gen.biz has posted what they know on the subject and its just not matching the Financial Times report and reads as follows: a Microsoft rep said in a phone interview with Next-Gen that that is "not at all" the case, and Microsoft will "remain focused on the games" for the console, not its movie playback capabilities.

"There are no plans to introduce Blu-ray," said the spokesperson.

"In response to Stan Glasgow’s statement that Blu-ray is a possibility for Xbox 360, we have made no such announcement," the rep added in an e-mail. "Games are what are driving consumers to purchase game consoles and we remain focused on providing the largest library of blockbuster games available."

If your wondering what my take is on the subject i wold say if 360 gets a Blu-ray player that wold be neat, if not that wold not be neat at all, but its still the best console on the planet for games.
So now your up to date on the 360 Blu-ray topic and can form your own opinion, we here at the HQ will as always keep you updated as we get the info.