Several readers have written to mention that Microsoft has confirmed and unveiled the Zune HD. It has a "3.3-inch, 480 x 272 OLED capacitive touchscreen display, built-in HD Radio receiver, HD output," and it makes use of multi-touch input. More details will be forthcoming at E3, including how the device interacts with Xbox Live. Reader johnjaydk notes a PCWorld article that asks whether the Zune HD will be capable of competing with the iPod Touch. Quoting: "... the real competition between the Zune HD and the iPod Touch will come down to software. The new Zune will be based on a custom version of Windows CE, while the iPod Touch runs on the already popular iPhone platform, for which thousands of applications are available."
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