"It's got nothing to do with us," the Toshiba spokesperson stated. "But we know Microsoft doesn't want to include the HD-DVD so as not to limit the user's experience." Which is what Microsoft has said all along.
Whilst there is an obvious attraction in having HD-DVD integrated into Xbox 360 hardware, the main concern the idea raised was the possible implications it would have for existing non-HD-DVD 360 owners i.e. compatibility with new software.