Updated Story: Microsoft's Major Nelson has taken to the internet airways to clarify the reported disc read error problem and the proposed Xbox 360 replacement plan.
"Clarification time! The console replacement plan that is the subject of some of today’s headlines is related to a previous update, NOT the system update that has been in public beta and will be deployed shortly.
"The new disc format that is part of the beta has been rigorously tested across all Xbox 360 models and there are no known compatibility issues.
"Hope that clears a few things up."
The problem has been verified by Microsoft Support, who have issued a statement saying that a small percentage of the 360 install base will be experiencing “disc unreadable” or “disc unsupported” errors. The issue seems to be limited to owners of older Xbox 360 models.
But there is good news. Microsoft is reportedly planning to compensate people who have 360s that no longer read discs after the update is applied. Because, let’s be serious, the system becomes pretty useless if you can’t play the games meant for it. If you find yourself in this predicament, you’ll need to contact Microsoft support, who will ship out to you a brand-new 250GB Xbox 360 Slim and a year of Xbox Live for free. This sounds like a pretty sweet deal.