With E3 a little more than two weeks away, we start hearing interesting tidbits, rumors if you must, about everything under the video gaming sun. One juicy rumor I came across recently was the possibility that Microsoft might reveal their very first handheld gaming system.

This device, dubbed the “XYZ” by various news outlets, will feature a WVGA touch screen, play music (think MS Zune), an Internet browser, as well as being compatible with the Xbox 360 console. If this rumor is indeed true, it would almost have to feature some sort of compatibility with the next generation of the Xbox console. It would not make much sense for Microsoft to release this gadget and have it only be compatible with a console that's almost 4 years old.

Graphics and resolution would also come into question. Would they be as good as Sony's handheld, the PSP? Or would they be better? I would also expect a new “channel” on Xbox Live to surface if this is unveiled. Said channel would feature downloads, USB connectivity, firmware updates, etc.