Exactly one month ago I wrote that Microsoft was winning the war for the living room. In the time since then I chose to get the Xbox 360 Elite over the Apple TV and I’m really enjoying it for digital content.

Early this morning brought the much anticipated Spring Update for the Xbox 360. This update rolled out a handful of changes but none bigger then updated video codec support. The 360 now supports playback of both h.264 and .mp4 video files of up to 1080p resolution – yes full 1080p.

Engadget has already tested the new video playback out – and they say it’s great.

Apple TV meanwhile still seems stuck at its sub-DVD (a bit below 480p) resolution. True, the device does have built-in support for up to 720p, but Apple has yet to release any movies at that resolution on iTunes. Microsoft, meanwhile has been offering 720p video downloads (both movies and TV shows) for a few months now.

How can Apple be so far behind Microsoft in this regard? I just really can’t see any real benefit of getting an Apple TV over a 360 at this point. Yes, the wireless streaming is nice, but unless you have a brand new computer with the latest Draft-N WiFi built-in, you’re probably not going to want to stream HD movies from your office to your TV anyway. And Microsoft really makes that moot as you can of course download content right to the 360 which you cannot do with the Apple TV.

Sure the 360 is loud (it really is almost comically loud with that fan) and yes if you’re within 3 feet of it it feels like a space heater; but in terms of being a video playback machine, it doesn’t seem to get much better. As if I needed to mention that you can hook up an HD-DVD player to it as well – something that again, you can’t do with the Apple TV – and of course there are the video games…

Anyone who is a regular reader knows that I love Apple products (the word ‘fanboy’ has been heard coming in my general direction), but I think that with the Apple TV they really dropped the ball. It would seem that Steve Jobs simply underestimated the move to high-definition and perhaps neglected this toy in favor of his bigger one (the soon-to-launch iPhone).

There still is hope for Apple. Disney had some very positive numbers to release today about their movie downloads on iTunes. No doubt the other studios who have yet to sign up will be seeing these numbers as simply missing profits for their companies and eventually they will get on board.

By the time they do it’d be nice for Apple to have a home media hub worthy of housing such content. I’d love to see a Mac Mini/Apple TV Hybrid. It has been a while since Apple has updated the Mac Mini and simply giving it the Apple TV functionality would not be hard at all. With such a combo you would have a device with a very large hard drive (at least bigger than Apple TV’s weak 40 gigs), a DVD player built-in (and probably eventually a Blu-ray player too), a simple way for users to convert their DVDs to digital formats (though the Hollywood studios would not like this very much), oh yeah, and a full-featured computer to boot.

Until we see such a device, Microsoft is going to continue to slap Apple around in this arena.

Microsoft has a solid FAQ about the new video codecs.