This morning, Microsoft hooked us up with an early preview of the next Xbox 360 Dashboard Update. We were able to get a look at the new Netflix features (which no longer require a PC,) the Avatar Marketplace, Game Ratings, Games on Demand, and more. While more coveted features like Twitter, Facebook, Last.fm, and Zune Marketplace won’t be landing until the fall, the update is still a solid one. Here are our thoughts on the next update, which lands on your Xbox 360 on August 11 (or sooner if you apply for early access!)

AVATAR MARKETPLACE
Let’s start in the Avatar Marketplace, since we know a lot of you are into customizing your avatars. Two things should be noted here right off the bat. First, you will definitely be able to create avatars that are way more unique than what you find with the standard offerings. Second, you will pay for that privilege. We were able to browser through some gear from Halo 3, Halo 3: ODST, Fable II, and more. The experience is very cool, and the clothes are a lot more unique - especially some of the full-on outfits. As for cost, the cheapest thing we found was 40 Points, and that was for a ring. The Halo 3 Warthog RC car that we purchased costs 320 Microsoft Points. Most everything was 80 or 160 points, although, like we said, we did find a couple of things that were 320 Points as well. That’s a range of $.50 to $3, with most things falling in the $1-2 range. That can start adding up fairly quickly.

GAMES ON DEMAND, RATINGS, PREVIEWS
Games on Demand lets you purchase full games on your Xbox 360, and you even get a printable manual as well. No Xbox 360 games are in there just yet, but by the time the update hits your console on August 11, there should be a few. Ratings works well, and you can see how many different people rated a title, and whether you’ve rated it. One thing I found, although I may have to go back and look again, is that if you go in to rate a game, you can’t back out without rating it. So if you accidentally try to rate a game, and you’ve never played it, you’ll still have to give it a rating before you can back out.

NETFLIX WATCH INSTANTLY
Very excited about the new Netflix updates found in this latest update. In fact, this is what Netflix on the Xbox 360 should have been from the start. First and foremost, you are able to browse through the entire Watch Instantly offerings. Everything is split up into categories, including New Arrivals in movies and television. You scroll through the available movies in the same fashion that you did your Instant Queue in the current version of Netflix. While that keeps it intuitive, there is a drawback. Since you can see everything available to watch, browsing through titles can be a bit time consuming. It would be nice if you could just type in a search for what you are looking for. Just a small gripe in an otherwise fantastic update.

We also noticed that the network connection to Netflix is much improved, and they’ve added an additional bar to showing you how good your connection speed is. We tried out an HD title, and it did indeed look better than it did in the current version of Netflix on the Xbox 360.

You also have Movie Parties. You can invite other Xbox 360 Gold Members who are also Netflix subscribers - yes, you can only do this with people who meet both of those requirements - to watch Netflix movies with you. If you have a party, you can suggest a movie that everyone can watch together. One thing that we did notice, though, is that none of the Starz Play stuff is eligible for Movie Parties. Kind of lame.

A GREAT SET OF NEW FEATURES
All-in-all, we are impressed with this intermediate update for the Xbox 360. We call it that because we still have to wait until later this fall for some of the things we’ve been anticipating, like 1080p instant-on movies from the Zune Marketplace, Last.fm, Facebook, and Twitter. Still though, with the features we get on August 11, we will definitely be tided over. We will have a video tour up later today that shows off the dashboard update, so stay tuned for that.