By Margaret Lyons
May 27, 2009 at 08:06 PM EDT

Tiny software start-up Microsoft announced a big development for its Zune today: Zune HD! And the Internet heaved a collective sigh of “no joke.”  Indeed the Zune HD — in all its touch-screen glory — has been a badly kept secret for months. But now the zunecat’s out of the zunebag, although pricing and capacity are still under zunewraps.

The new gizmo, set to come out this fall, sports a 16:9 widescreen, though the “HD” in the name is a teeeeeny bit  misleading: It’s HD radio, no video, though the gadget can do HD video output with the right docking station. That means  you can use the Zune HD like a portable HD player, but you still need an HD monitor (like your HDTV) to actually view it.

The major development is Microsoft integrating Zune HD with Xbox Live, though details of said integration won’t be available until the dog-and-pony show at E3 next week. Games? Something along the lines of an app store? A magical download that turns your Zune into a wand that grants wishes and makes kittens giggle? Anything is possible, you guys.

Confession: I don’t think I’ve ever seen a Zune out in the wild. I’ve seen it in photos online, I’ve heard people use it as a punchline, and it comes up on my favorite podcast now and then.

Is the ZHD a splashy enough product to entice would-be iPod folk to switch? Is the draw of an HD radio a big enough deal — or will the Xbox Live integration be the real draw?What do you think, PopWatchers? Any hardcore Zuneophiles out there?