Thanks to Total videogames who seem to have picked up on some rumours concerning Xbox 2.

Apparently all Xbox2 titles will need to be Live! aware, so that gamers can easily recognise who is playing what. The media player within Xbox2 is built upon Windows-Media 9 and is set to establish the Xbox2 sitting alongside your PC to transfer and view movie footage. The Xbox2 will feature support for MP3 and WMA files Games and other software will be stored on 7GB Dual-Layer DVDs. The Xbox2 HDD is an optional purchase

Certainly a lot of speculation around at the moment, only time will tell I suppose.