When the latest dashboard update arrives from Microsoft starting on August 11th, the new Xbox 360 Game on Demand feature will be added, which will allow users for the first time to purchase Xbox 360 titles for download that had previously only been released at retail on disc.

The biggest part of the puzzle with Xbox 360 Games on Demand is the pricing of the games that will be available for purchase with this feature. It would appear that the titles that users will be able to buy will cost between 1,600 and 2,400 Microsoft Points, which translates into the $20 to $30 price range.

As expected, this means that the majority of the titles that users will be able to download using this feature will be older or classic titles, at least to start with. While Microsoft has not announced any plans to offer more current titles using this method of distribution, we would not put it out of the realm of possibility in the future. At least to start with, the focus on older or classic titles does seem to make the most sense.

From what our sources tell us, you can expect many of the titles that have reached the Microsoft Xbox 360 Platinum Hits collection status to be part of the many offerings that are likely to be first offered for download using this method of electronic distribution.

While Microsoft has not yet explained all of the future details that the Xbox 360 Games on Demand distribution might encompass, it is clear that the company wants to measure and test the ability to deliver Xbox 360 titles using this method.

One interesting part of this move is that because of the amount of space that will be required for Xbox 360 Games on Demand to be downloaded onto user hard drives, our sources tell us that Microsoft will finally be announcing the availability of a larger hard drive for the Xbox 360. From the latest reports that we have received from our sources, Microsoft has apparently elected to go with a 500GB offering that seems to be the sweet spot price-wise for the company to offer.

It is expected that once the Sony price cut takes place, Microsoft will move to the 120GB hard drive as the new standard offering for the hard drive-based console. It is expected that Microsoft will do away with the 60GB model as inventories are depleted, only offering users a choice of a 120GB and 500GB drive for expansion.