Unfortunately for Microsoft, they need to start looking at GM (future). If Microsoft does do something to starve off how big they are and how many division they have that compete for the same market space then they will end up just like GM.
Microsoft core business is software, more importantly it is OS software. Office was not their market until WordPerfect prove to be a successful product. Databases were not their market originally either, DBASE and other old database programs were. I could go on and on. But my point is Microsoft attempts to break into the market when it is too late. The Zune would be an excellent iPod alternative if it came out earlier and it came with features that made it equall to or better then an iPod.
Now that Microsoft has most of the gaming industry under its belt, why now integrate the Zune with the 360? Why not make this unit the consumer space PDA like an iPod Touch?
The pictures look good, just hope Microsoft doesn't screw up with the price and marketing.