Xbox 360 Live is being upgraded, but according to Kotaku, the upgrade isn’t compatible with all current Xbox 360 consoles. The upgrade, which reflashes the DVD drives to firmware and supports the new XGD3 disk format, is being released between May 19 and May 30. The incompatibility was discovered during testing.
The issue, though, seems to be deeper than just not playing certain games. Several new additions to this upgrade have never been seen before, according to some hackers who have been working to reverse-engineer the new beta dashboard.
Among the new additions to the updates is the fact that updating a hacked DVD drive will immediately removed their ability to operate pirate software. The hack code is completely removed from the drive.
New security features have been added to the upgrade as well. These features, which previously would be disabled by older machines, are now deeply embedded so that they cannot be skipped as before. According to sources, other security measures are in the works that can be added to the game to help prevent piracy. These new measures would allow the disc to be scanned periodically throughout the game and could even “downgrade” the pirated game to a playable demo that would end after several levels of play.
The XDG3 disk format appears to be pretty important to Microsoft. In emails sent to Xbox Live Customers, if their current Xbox console isn’t compatible with the upgrade, Microsoft will send them a “new Xbox 360 S and a year’s free Xbox Live” to ensure compatibility.