clipped from: crave.cnet.com 
Following HD DVD's demise, there's been a lot speculation that Microsoft would add a Blu-ray option to the XBox 360. The latest rumor has a subsidiary of Asus, Pegatron Technology, making a premium Blu-ray-equipped version of the XBox 360 that will arrive in time for the holidays. This one follows on the heels of a report that Lite-On was going to be the one making the Blu-ray drives for Microsoft's game console.
If you speak Chinese, you can translate the Asus rumor from Economic Daily News, a publication that Gizmodo calls a "Taiwanese rag." While we may not have tremendous faith in the specifics of the rumor, Taiwanese companies aren't known to keep secrets all that well (that's a gross generalization based on a few comments I've heard from industry insiders, but I believe it). And it does seem logical that Microsoft will add a Blu-ray option to help eliminate any perceived advantage that Sony might have with the PS3.