Engadget Story
Gizmodo Story
it looks like it may not be for the Zune 30s, but this is still pretty amazing since every interview I've seen said Microsoft was not focusing on games. This is an amazing surprise!
EDIT (16:05 Central)
Cesar says...
"Here's an important point of clarification: The announcements at GDC are about the new XNA Game Studio tools, which will support game development on Zune in the future. These added XNA capabilities are the first step toward offering developers the opportunity to design games that could be played on Zune devices, but Zune is a wireless music and video player first and foremost."
That, to me, sounds like a big fat "good things will probably come of this but don't start crying about not having your games tomorrow."
However, they did demo a game somewhat from what I can tell in the pictures on Engadget.
Sure this is a music player first and foremost, but some simple games would be great for on the subway or bus when boredom sets in. From day one people, myself included, have been saying that the Zune looks like it was designed to be a Tetris device. Just look st that screen the the four directional controls. Destiny is destiny, and I see Tetris in the near to moderatley distant future.
EDIT (17:57 Central)
New details from Engadget!
The above link contains hands-on pics and many details, but still not every detail people want to know.