What follows is pure speculation... and some science-fiction.
- Microsoft could have server with worldwide (possibly photoreal) scenery (think of it as an integrated Tileproxy), so that fixes and additions to the scenery can be done on the fly. This appears to be the only way to manage an extremely large photoreal database (thousands of Gb).
- In the same way, a server-based deployment of addons could be a great improvement. It could work like this: when you are compliling the flight plan, the simulator tells you that there are relevant sceneries (free and payware) that can be dowloaded if you wish (transactions for payware could be managed via Live) and it can dowload and install them automatically "on the fly".
- Add-on planes could be managed in the same way - you could type the plane you would like to fly and, if it is not on your computer yet, the simulator can check if it is available for download, then download and install it on your command and manage the transaction if it is payware.
- Note that all of the above can be managed for payware and freeware - developers should only upload to a server in the proper way. And it does not preclude third parties from managing other servers (think of the same way Vuze browses in different repositories)
- In case the scenery gets too big to handle for a console, it may be possible to "redesign the game" in such a way that the "action" is concentrated in "chunks" of sceneries (see H.A.W.X. or Flight Unlimited II, say 100 x 100 nautical miles). Long travels could be impossible - still, a lot of common simming activities could be perfomed.
- All the points above can be achieved on X360, too - the only problem I see being that the 360 has a total of 512Mb of Ram - it can be split at will between code an video ram. Not enough to handle the most complex add-ons.
Well, these were just a couple of ideas... I have really no clue on what Microsoft may be doing. But, I think there some potential in bringing realistic flight simulation to consoles. I just had a look at some previews of Sturmovik for the Xbox and it looks really interesting.