A couple of hardware update rumours for the Xbox 360 have surfaced this past week. First up is that Microsoft is planning to move from the 90nm IBM Xenon PowerPC processor to a 65nm version which should help with overheating issues. Codenamed Zephyr, this 2nd generation Xbox 360 should also come with a 120GB hard drive (twice the capacity of the top PS3) and an HDMI port for full digital 1080p support.
A second rumour (posted and then removed by the San Jose Mercury News) suggests that the Xbox will soon add IPTV capabilities, allowing it to receive live and on-demand video.
Given that Bill Gates is doing the Pre-show Keynote Address sunday night, we might know fairly quickly how true these rumours are.