An interesting wrinkle appears when you look at the News.com story as well as this article at ZDNet. First, a quote from the News.com story:
"I think the fundamental flaw is not so much that Microsoft didn't know what they were doing--they did a really good job of covering their tracks in the software. But they contracted out the hardware design to someone who didn't care as much."
Now, take a look at this blurb from the ZDNet story:
Huang said the Xbox's primary security is contained in what he calls a "secret boot block" that is encoded into a media processor chip built for the Xbox by Nvidia.
It sounds like the author could be blaming NVIDIA for his being able to sniff out the secret code so easily. It's unclear, however (and we'll probably never know) whether it was Microsoft or NVIDIA who decided it was acceptable to pass the boot block over the bus unencrypted. For those who are interested, the original paper can be found here.