August 11, 2009, 8:03 AM — The next time you turn on your Xbox 360, you should get a system update (it just takes a few minutes, but you might want to show up early for your next 1 vs 100 session just in case). This is the update that brings you Games On Demand (though you'll have to wait until Thursday to purchase those), the capability to add titles to your Netflix Watch Now queue from the console, the avatar marketplace and a bunch of other enhancements. A full list can be found here.
There's been a preview program in place and reaction to the update has been generally favorable with a few gripes. The most-complained about issue seems to be the inability to search for specific Netflix content. Instead, you're hand-fed a pre-set selection of content to browse through. Microsoft hasn't said that full search is out of the question, so if enough Xbox 360 owners let Microsoft know they want it, perhaps it'll be added to a future patch. Probably the second biggest issue is with the props purchased from the avatar marketplace. They don't show up very often; for the most part just when you're idling on the dashboard. And lastly, the selection of titles in the Games on Demand section is small and mostly older titles, but in fairness Microsoft did say that would be the case, at least initially.
On the other hand, at least one hidden perk has been discovered. If you're a gamer who likes to install games to the hard disk (a nice feature that allows faster loading and quieter operation), you'll be happy to hear that a lot of game installs seem to be smaller after the update. To take advantage of this, you'll need to delete and re-install any existing games. No one knows for sure why this is, but best guess seems to be the system is smarter about not transferring duplicated data, packed-in dashboard updates or other 'extra' content.
All in all, it's been a solid update, at least in my experience. Still to come later this year, integration with Last.fm, Twitter and Facebook. Plus Zune Video, and we're still not really sure what that means.
If you've been in the preview program and have any tips to share, please do so in the comment section!