I just finished typing out a mega long ass interview I did with Chris Satchell (GM of XNA team) while at GDC. A lot of it is fluff to be honest, but I think he hinted at Xbox 2 using the same DVD9.
http://biz.gamedaily.com/features.asp?article_id=9165
http://biz.gamedaily.com/features.asp?article_id=9165
BIZ: With next-gen games being even more massive in size, a larger storage medium for game content would seem necessary. Sony has already confirmed Blu-ray for its next-gen PlayStation. What are your thoughts on this, or is it possible to do next-gen games on the current DVD standard?
CS: As you know I can't get into the specifics about hardware, but absolutely you can create next-generation games using the DVD (DVD9). We haven't gone for any particular HD standard because Hollywood doesn't know which HD standard they're going with; that's still up in the air. And what we've decided is we're not going to wait for them to work out what it is. We're just going to start leading with the HD Era of gaming right now, with our next-gen console.
Some of things we've worked on [at MS R&D] are more advanced compression techniques, so we already have excellent compression with Xbox... what we're doing on our next-generation console are compression techniques that are even better. And that's great because you can have a lot of storage and if you look at the specs for some of those storage solutions, the problem is the storage is great but the bandwidth might not be there. And if you've got tons and tons of data and you put it through a little pipe, well you've got an issue there because it takes forever to get that data. If you use compressed solutions, you're actually making more effective use of that pipe, that bandwidth. So what we did is we did a lot of work on advanced compression techniques. However, there's another side. We looked very carefully at how much data current gen games use... when we mapped it out, we realized that we do actually have enough room to do these real next-gen experiences... and even better you've got great bandwidth and can load your games faster.
But there's another reality that comes into this. Some companies talk about huge storage solutions, but the thing that they need to ask their developers and publishers is, "Can you afford to make this much?" What's the point of having all this storage if you can't afford to build it? Next-gen content is really expensive. What's better is focusing on giving people tools to be really creative and then giving them good software solutions so they can make more effective use of hardware like our compression techniques we're using.