Xbox 360: multiple versions planned

From xboxmagonline.com

Microsoft is still planning to ship two different versions of its Xbox 360 console at launch, according to sources close to the company, reports suggest that the high-end version may feature Microsoft's WebTV system. It's long been thought that Microsoft plans to ship two different Xbox 360 bundles, one with a hard drive and one without, and give users the option of upgrading the low-end system with a hard drive accessory. The basic edition of Xbox 360, the version without the hard drive will not have backwards compatibility, while the "premium" version with the hard drive will ship with Microsoft's WebTV functionality built-in
WebTV is Microsoft's effort at bringing internet communication and media functionality to the living room, and includes basic functionality such as web, e-mail and IM access along with the ability to stream music and video channels from the 'net or from local PCs.