Not at first. I really hope they don’t "upgrade" the 360 to HD-DVD later on, thus forcing people to buy a new one. I just can’t see Microsoft doing that given the inevitable negative reaction from early adopters, but Bill Gates hath spoken:

“We are looking at whether future versions of Xbox
360 will incorporate an additional capability of an HD DVD player or
something else.”

A statement that’s open to interpretation, certainly (one being that this will just be for HD-DVD Video). We’ll see where this goes.