Is Microsoft readying an HD Zune?

Warning: rumor and speculation incoming!

Pictures and specs of an alleged new ZuneHD showed up at (the 'wm' is for Windows Mobile) today. This new Zune is said to sport an OLED multi-touch screen, includes an HDMI port for output to a TV, includes HD Radio as well as playback of HD media, and will play XBox games. Waa??

We stumbled on this post via Engadget, and they tell us their sources say the image, at least, is probably legit. (Half the fun of reporting these rumors is following the bread crumbs back to the sources!)

It would be great news if this turned out to be legit; Apple needs some well-muscled competition for the iPhone/iTouch, and who better (or bigger, at least) than Microsoft? The XBox games thing, in particular, smells fishy though. With no physical controls, it'd take a lot of re-coding to get XBox games playable on a touch-screen device. However maybe the term was being used loosely, and they meant XBox-like games? Casual gaming is gaining traction as a selling point for the iPhone/iTouch and any competitors won't want to leave that slice of the pie on the table.

The speculated release date is September, so if the device is real we should be hearing more about it sooner rather than later.

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