The news coming out this morning on the XB360 front, is that the newest update (which should be out tomorrow) is causing a few XB360 systems to not be able to read discs. The news is sporadic right now, stating at first only the slim model systems are having this issue. A few reports online have mentioned that a few people who own the older model are having the same issue as well. Even if this is true, Microsoft will only replace the newer systems since the old model 360 systems are out of warranty. Hopefully this is untrue and that any system that is having a problem with the newest update will be replaced.
Following a recent update to our system software, we have become aware of an issue that is preventing a very small number of Xbox 360 owners from playing retail game discs. This issue manifests itself as a unique “disc unreadable” or “disc unsupported” error on the screen and is unrelated to our recent public beta. We are also able to detect this issue over Xbox LIVE and are proactively reaching out to customers that may be impacted to replace their console. Any Xbox 360 owners receiving this error are encouraged to contact us at www.xbox.com/support/contact so we can verify if the console has been impacted.
This disc read error message is tied to a change in the disc reading algorithms in a recent software update and is not specific to older or newer versions of Xbox 360.