Well software-wise, Microsoft has a reputation of being screwy (paraphrase from PC mag. Go sue them if you don't agree). Seriously, I don't see how Microsoft is going to out-do Nintendo or the PSP by specs alone (e.g. Xbox versus PS2 or GCN). They needed the good games out there and good supporting franchises that both Nintendo (an abundance) and Sony (less, but there still are several) have. Sure they bought Rare and brought PD and Conker franchises (which the Conker franchise has been known to be less popular than the Banjo-Kazooie franchise, also held by Rare). They'll need teh games to support their specs. Well that and some major revisions on some (IMO) failures of the Xbox, including the controller (and therefore the transferred handheld sizing).
Also, as Shadow pointed out, the Xbox is really just a computer (ppl make them cheap linuxes one way or another), so Microsoft really needs to look at things differently to ensure that they're getting their systems AND games sold, not just the system itself.
And the screen clogged up idea is according to preference. I fine myself needing all of that on the same screen when I play RPG games (and to an extent, shooters...which is rarely ever play). It would definitely be uncomfortable for me to have to head to a second screen just to see the stats and stuff.
