Will MS sell versions of Xbox games for the Xbox 360? That doesn't sound very backwards compatible to me. Earlier this year, when Xbox 360 speculation was rampant, it was said that the Xbox 360 would only be backwards compatible if it had the (optional?) harddrive. That would make sense as MS could essentially recompile-on-the-fly. Hopefully that will work, but judging from the GamesIndustry article, it doesn't seem likely.
So what is MS to do? Will we be able to trade in our current Halo 2 for a recompiled version? I think what is more likely to happen is that the recompiled version will be able to be downloaded to your Xbox 360. Imagine this scenario: You pop in your Halo 2 into the Xbox 360. It verifies that it is a legitimate copy, connects to Xbox LIVE, and then automatically downloads the recompiled game for you. This would make sense from the "you need the HDD to have backwards compatibility" perspective...meaning basically, that you need the HDD to store the downloaded recompiled game. However, get 10 or 15 full games on your HDD and its full.
That process would be fine, as long as you have a good broadband connection. The question that arises, however, is how many of the current catalog of Xbox games would be made available in this manner? Obviously the big ones, but will I be able to play Nightcaster on my Xbox 360? I doubt it.
With the PS3 and the Nintendo Revolution both backwards compatible, without any caveats, Microsoft needs to make sure it has a legitimate and easy way to make their remedial backwards compatibility process a reality.
Gamers are too smart to mess around with.