After my first meeting with the folks from Microsoft (I'll be recounting them all in reverse order) I was offered a demo of the new IPTV software and a chance to check out the currently live Video Marketplace. While the former was one of those products I was marginally interested in just yesterday, Microsoft's Aaron Greenberg and Peter Moore did an excellent job selling me on the service.

With Greenberg driving, he showed that the IPTV service was up and running, live on an Xbox 360 nicknamed "Carbon." This was a point that Greenberg and Moore drove home several times. Despite the fact that the service will not hit the 360 until the "back end" of 2007, the streaming programming and DVR functions were working like an already shipped product. While we didn't get a chance to check out Live features like text messaging and voice chat with the IPTV service running (network connections were spotty in the press tent), the platforms are seemlessly integrated.

Picture-in-picture in HD is perfect, allowing you to continue to watch your main program in the background, with a full screen menu overlay and alternate channels running flawlessly at the bottom. Moore also let slip that newer features, like caller ID with the system hooked up to a landline, would also be available.

When asked about larger hard drive space to hold all that programming, as well as game saves, trailer and demo downloads, Greenberg said that he thought the current hardware configuration with the 20GB drive would serve most families, but that those in need of more space would probably need a "potential upgrade." Not exactly confirmation of a new 120GB drive, but we all know it's coming.

I asked the pair if Core Xbox 360 owners would be able to take advantage of IPTV. They told me it was technically feasible as it's a software solution, but that, obviously, DVR functions would be useless.

Video and interface on the IPTV were as clear as the content already available for download on the Video Marketplace. Using the Xbox 360 Universal Media Remote, channel changes were instant. Moore complained of the current 1-2 second lag when surfing via satellite (he's a DirectTV subscriber) then quickly followed up with "I know that complaining about one second lag makes us sound like spoiled brats..." Nah. Totally justified.

We spent less time looking at the Video Marketplace, as the service has been live for some time. Microsoft was very proud of the fact that they're the #2 digiital distribution platform for video content (behind iTunes) and the #1 provider of HD content. As we strolled through the current offerings like Jackass, UFC matches, and Aqua Teen Hunger Force, I asked when the content would start to appeal to a broader audience. Peter responded with "When the time is right." He pointed to CSI and the inclusion of major networks as a good indicator as to the breadth of content appeal, but didn't lead me to believe an active effort to secure Lifetime original movies was on their to-do list.

I'm hoping that that 120GB version of the 360 is announced soon, as I'm going to be fully on board with the IPTV service. It looks like an excellent replacement for folks looking for an alternative (or add-on) to satellite and cable subscribers, I just need that extra storage. I'm a bit of a digital content packrat.

Oh, and about Peter Moore crying. He admitted to weeping like a little girl at the end of Peter Jackson's King Kong which was playing on the HD-DVD add-on when I entered the room. Wuss! Michael McWhertor

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