The on again and off again rumors that continue about Microsoft adding Blu-ray support to the Xbox 360 console seem to be heating up again. While Microsoft continues to say that they have no current plans to add Blu-ray support to the Xbox 360, it would seem that the latest rumors have Blu-ray support just around the corner.

Our sources are telling us that the deal has been done and Toshiba-Samsung has been contracted to manufacture an external Blu-ray add-on drive for the Xbox 360. The device is said to be very close in appearance to the HD-DVD drive that Microsoft offered for the Xbox 360.

The release date for the add-on drive has yet to be determined, but the latest school of thought is that Microsoft will either announce in early November that it is coming in order to reduce any possible loss of sales to the PlayStation 3 console just by the fact that it offers Blu-ray support. Still, our sources are suggesting that Microsoft may wait until CES to launch the add-on Blu-ray drive.

As for the internal Blu-ray drive that has been long rumored to be coming to the Xbox 360 that has said to have been contracted for Lite-on to produce for Microsoft, we are not hearing much. Several sources are telling us that it will be offered in a new version of the console that will be announced at CES. Specifics are still sketchy and we have been told that Microsoft still has not been able to get the internal Blu-ray drive to a price point they are satisfied with such that it makes sense to add it.

As for the add-on drive, the suggested retail price is expected to be in the $100 to $150 range, which would be about right, based on current Blu-ray drive costs and the previous add-on HD DVD drive that Microsoft offered for the Xbox 360.

We think that it is only a matter of time before Microsoft offers a Blu-ray solution for the Xbox 360. It has been surprising, quite honestly, that Microsoft didn’t move to offer an external Blu-ray drive sooner so that they would have one available for Xbox 360 owners this holiday season. Blu-ray is making a big push for the holiday season and it is really unknown how much of a difference not having a Blu-ray drive will make in buyer’s purchasing decisions; but Sony does continue to play up the fact that the PlayStation 3 does offer a Blu-ray drive.