For several years, consumer electronics and computer companies alike have fantasized about creating the ultimate entertainment hub, a single set top box that could manage all your music, movies, video games, and even tap into the Internet. With a major software upgrade this week, Microsoft’s Xbox 360 may come close to realizing the fantasy. The update not only goes a long way toward smoothly integrating all these features, but also includes direct access to Netflix’s instant play movie service, which could help the company win the war to become the iTunes of downloadable movies.

To be released on Wednesday, November 19, as an automatic upgrade the New Xbox Experience (NXE) jettisons the geeky “blade” user interface in favor a more legible and manageable interface. In general appearance, it looks more like the rotating screens of Aero from Windows Vista, which lets users sit back and flip through a virtual Rolodex of gaming options, downloadable features, and videos online. In other words, it looks more the face of a television entertainment hub than a computer-based gaming machine. Indeed, after a couple of weeks of testing NXE, I found it to be friendlier, faster, and cleaner than the old software, and it contains some elements Xbox owners—and those considering an Xbox 360 purchase—will likely find irresistible.

3D Avatars
There are now animated 3D avatars that owners can customize to represent themselves online. Unlike the kid-friendly avatars of the Nintendo Wii, you can adjust more features including body shape, face, hair, and sartorial choices. You can even join up to 7 avatar friends in a virtual area to chat while you’re playing a game or skipping through photos or just hanging out. The NXE also has a section promoting upcoming Live events, such as game previews and contests. Microsoft plans to expand this area to include original programming and game shows where Xbox Live subscribers can win real prizes (and not just new hair styles for their avatars).

One oft repeated criticism of the Xbox 360 is its cacophonous DVD drive whose constant grinding during game play can be a distraction. So the new NXE software allows owners to install a game directly to the hard drive, which should placate some players.

Netflix Access
The main attraction of the new software will doubtless be direct access to Netflix’s 12,000 (and counting) downloadable movies. To tap into this new feature, you must be an Xbox Live Gold member, which is $50 a year, and a Netflix subscriber. The minimum Netflix subscription required is the monthly $8.99 charge for unlimited streaming and one-at-a-time mail order DVD rentals.

In early tests, the video quality of the Netflix titles was surprisingly solid. However, much of this depends on the bandwidth available on your Internet connection (we tapped in at from 2 to about 4 Mps). Netflix can transmit titles at up to 1080i on the Xbox, making the experience fall somewhere between watching a standard DVD and an upscaled DVD. It falls short of true high-definition primarily because of the compression required to get the data down your Internet pipe. Consequently, perspicacious viewers will notice a loss of contrast and subtly in shadings, especially in dark scenes. Nevertheless, the picture quality is generally superior to that offered by competing systems.

The $99 Roku Netflix player, for example, is currently limited to standard definition titles at 480i so the picture quality is “soft.” Roku plans to upgrade its boxes via a software update to deliver HD movies from Netflix by year’s end. However, Roku will use a lower bit rate and therefore still lag behind what the Xbox 360 can potentially deliver.

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