Blu-ray or no Blu-ray? That is the question. Between Sony saying that Microsoft has interest in a Blu-ray drive, and Microsoft executives saying no or dissing disc based media altogether, who’s to say what’s really going on behind the scenes?

Digitimes is attempting to do just that and if their spies sources are correct, Lite-On IT is currently working on Xbox 360’s which will include internal BD-ROM drives. It’s being rumored that these new Xbox’s will also contain one of the new motherboards (Jasper, Opus or Valhalla) which were rumored a short while back.

It seems like Microsoft is in a rather tight situation at the moment. They have to choose one of two routes, the first being the Blu-ray internal drive/add-on. This would be the easiest solution to the growing demand for the winning HD format on the market, but it would also it be a bit humbling from MS’s perspective in that they would be admitting that Sony was right all along. Their second option is to get serious about broadband digital distribution, which is something they’ve been trumpeting for months now. In order do that they would need to release reasonably priced hard drives and/or make USB HDD’s available for use on the system. They would also need to secure deals with film distributors to get same-day releases on both physical media formats and thier DD service. Neither of these options seem more than marginally likely at best. Still, what makes this rumor interesting is the fact that Lite-On IT has developed DVD-ROM drives for 360’s before, so there just may be a glimmer of truth in this. However, the official word from Microsoft remains a simple NO. That sure doesn’t sound very promising…