Speculation abounds about what our intentions may be with the Xbox 360, so I thought I would address some of my thoughts on the subject.
First off, we have no plans to move FS to the Xbox. We have been a PC title for 25 years and our technology reflects this heritage. That alone isn't a good reason not to support the Xbox 360, so there must be more to it. Currently we model the entire planet and our 13+ gigabyte installation (before add-ons) would be gigantic on the Xbox 360's HD (streaming from a DVD or HD DVD may not be fast enough to avoid an install on the HD). Once you start adding on, space on the HD will dwindle quickly. The amount of RAM and VRAM we use would be taxing on the system, so we would need to develop streaming technology to manage within the limitations of the system. If we are streaming, we will be loading as needed (which we do now) but potentially in smaller chunks. I'm no expert on what the Xbox 360 is fully capable of, but I'm guessing we would need to curtail the visibility to somehow limit the view distance and thus limit the number of textures and geometry that needs to be streamed.
The user interface (controller and graphical UI) has some issues as well, and it will be difficult to provide the same level of functionality and depth currently possible when using a mouse and keyboard. Considering we are supporting the Xbox 360 controller now, we can probably find a way to address this, but it would likely involve simplifying the interface and using icons and quick select mechanisms to manage systems (in addition to point and click in 3D space).
In my opinion what it all boils down to is an Xbox version of FS would be a different game with different limitations and a different "engine" that may not be palettable to our simulation fans. I can't imagine we would do such a thing without continuing with a PC only version as well. I also wonder if Xbox consumers are really ready to embrace a civilian flight sim game without shooting and action oriented gameplay. The reception missions in FSX by users are a clue, and there may be enough appeal to justify an Xbox product, but it would be a gamble.
The graphical splendor possible with the Xbox 360 is amazing, but don't hold your breath for an Xbox 360 version of Flight Simulator anytime soon. At least with DX10 on the horizon, the PC will be at parity (if not exceed) the graphics capabilities of a console.