Agreed - that is the main concern for all Xbox-ers. They wanted a relatively priced console that 'could' be upgraded if they wanted. It's also the main criticism against the PS3 being the most expensive console of recent times (think the Neo Geo was the most!!). Adding in the bigger HD and HD-DVD drive would be shooting M$ in the foot as it's against what they have been saying about Phony's PS3.
Interesting to hear that some people do want a fully laden Xbox..
Also, being an external choice M$ could legitimately switch between HD-DVD and Blue-Ray depending on which one becomes the norm (of which, IMHO, we will have dual formats for quite a while as both have positives and negatives that only preference will decide).
Apart from the RROD issue, I really don't see the purpose of another incarnation.. Almost as many variants as the dreaded Vista!! (<- personal opinion: Vista is great for home [all flashy], but under-par for Business..)