http://news.cnet.com/8301-10805_3-57585109-75/xbox-next-what-to-expect-at-tuesdays-xbox-reveal-event/?tag=nl.e703&s_cid=e703&ttag=e703
If Microsoft has the 'brass ones' they would go all in on this and produce the following:
1) Heavy hitting graphics engine
2) A better Kinect. Kinect is conceptually great but way too laggy to really work IMHO. Plus it needs some kinds of way to 'press buttons' and the like without hover waves etc. It's a clunky interface
3) Beat Apple to AppleTV. A truly integrated experience that pulls together Netflix and the other major providers as well as either direct integration into the leading sattelite/cable providers, or better yet, a deal with the content providers directly.
4) Strong integration with Android & IOS, not just Windows 8, so you can control everything on your smartphone & tablet.