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A couple weekends back we covered a new webpage Microsoft launched on xbox.com that not only provides a fairly deep look at the new Xbox Live Experience coming this fall, it actually simulates much of its look and feel. I recently got a chance to grab a controller and play around with the latest in-development version of the real thing at a demo here in San Francisco. And while I messed around in the menus Microsoft director of marketing Albert Penello and senior strategist Rob Gruhl gave me some highlights and answered a few questions.

As you'll pick up on if you play around with the website simulation, the new front-end uses a two-axis navigation system -- sort of like Sony's XrossMediaBar (XMB), but turned on its side. Moving up and down selects the section you want to browse, including such choices as Friends, Video Marketplace, etc., and then you can leaf left and right through the 3D panels to make individual selections within that group. This setup does better lend itself to casual browsing of the content, and it allows them some variety with what they show. For instance, a new section titled Spotlight could be a great way to bring out the best of what's popular across the service at any given time, of course that's dependant on how well its content is managed.

Of all the new elements, none has received more attention than the addition of avatars. Using a character to represent your presence online has filtered through every corner of gaming from virtual worlds to Nintendo's charming Miis. But given that the whole intent behind their inclusion here was to inject some personality into the relatively sterile world of Live, I had to ask Penello why they chose to name them the generic "avatars" instead of something more evocative. He responded, "If we came back and over-thought it [the name] it would be disingenuous. Avatars is more legit than doing something that would be a Mii-too."

While I agree that a Mii-too name would have quickly sunk, that doesn't mean that a good name couldn't have helped establish some identity for the new avatars. As it stands, even without a Mii-too branding, they face some challenges in convincing gamers that they are more than Microsoft's attempt to copy Nintendo's success. Penello told me, "we aspire to do a lot more with how they are integrated into games." He sees that element significantly expanding after the new system is in place and all future games have adopted built-in support for avatar.

The other big addition to the new Live is the party system. Now when you go online, you'll be able to form groups of up to eight members to game with on Live. Along with the basic ability to keep your group together while moving from game to game, you can chat with anyone in the party, no matter what they're doing. So, while you're waiting for everyone to show up party members can do whatever they like. One person may want to play some Call of Duty while a couple others hop into a Castle Crashers session, and all the while everyone is able to talk to each other, so once the whole group is all there you can coordinate getting together.

On the tech side, the new Live completely overhauls the system and gives it a whole new foundation. In the current setup each blade is a hard-coded custom built page. The new Live uses a modular system, where the framework is there to allow all the content to be dynamically created at any time. This provides the ability to juggle things around without ever needing to bring the system down or push out a new update. If they want to make changes they just implement them on the Live servers, and you see them the next time you load it up. The downside to this new structure is that it rules out their offering any sort of "classic" Live experience. Once the new one comes out, everyone moves over. And for that matter everyone gets an avatar as well. You can choose to just go with the generic one that pops up, but there's no option to opt out.

Even with the good deal of effort that clearly went into the development of the Live Experience, it misses on a few pieces that I thought would have been top priorities. Given that the moment they login everyone I know goes straight to their friends list to see who else is online, I absolutely expected some sort of friends list to be the first thing you immediately see when you start up your 360 -- whether it was some sort of cute avatar-based thing or just a simple listing like my AIM buddies list. It's not. You need to navigate to the "Friends" group, at which point you'll see any parties with your friends in them and then the friends behind that for you to flip through. To get a complete list you have to open an odd piece of legacy from the old blades system, which somewhat inelegantly superimposes a pop-up set of menus in the center of the screen. From there you can select your friends list and get a plain list view.

After playing around with the new Live, I came away suitably impressed with the improvements but unable to overcome a sense of having hoped for something more. The new navigation definitely makes looking through all the available content several times easier, particularly once you get one level into the individual sections. And I should point out that I didn't get a chance this time to check out either the Netflix integration or the capability to install games to the hard drive. With those in there for the release this fall, there's plenty to look forward to. And once it's out, hopefully this new more flexible architecture will allow them to better adapt and improve Live on the fly.