Microsoft might release a "mid-cycle refresh" of the system in Fall 2009 

Straight from Joystiq :

Since it won't go anywhere near the Wii Fit balance board and is extremely likely to die during a heated workout, your obese Xbox 360 isn't going to get thinner in its lifetime. No, that's what the "Xbox 540" replacement is for, claims TG Daily. The site reckons that Microsoft will release a "mid-cycle refresh" of the system in Fall 2009, one built around a new and more compact "Valhalla" internal chipset. (Have we introduced you to Jasper yet?)

The shrinking of innards will reportedly allow a redesign of the system's exterior, much like the PlayStation 2's second iteration. Our fancy next-gen games may be getting bigger on the screen, but much like our Wiis, it seems we'll end up with something smaller to play with. On. Play games on. Multiplayer games. Curses! is there any way out of that one?