In a recent interview with Epic VP Mark Rein by Guardian Unlimited, Rein explains that they are still in talks with Microsoft to get user created content onto Xbox Live for players to download.
"Microsoft hasn't said "no" yet, but then they haven't said "yes" either," said Rein. "We need them to say "yes," and we need them to do it soon."
Rein went on to explain that the console is perfectly capable of handling user created mods, but Microsoft is understandably weary of letting content onto Xbox Live that could be potentially harmful to user's systems.
"They've got a closed system where everything's checked, users know the quality of everything they download, and you know it won't crash your machine," explains Rein. "User generated content - well, it can be dangerous; you could theoretically download a mod that uses too much memory and crashes your machine."
While they are running out of time to implement modding features into UT3 on the Xbox 360, Rein is hopeful that at the very least Epic will be able to upload a few of the best mods for players to download and experience.
"If it doesn't work out with Xbox 360, depending on sales of the game on that platform, I imagine we'll find a few of the best mods and get them on Xbox Live Marketplace," says Rein. "I don't think 360 users are going to suffer drastically - they're just going to miss out on a lot of crazy, cool fun stuff and the ability to exchange it among themselves."
On the bright side, Rein explains the Xbox 360 version is close to completion and all that remains to add in is the Xbox Live features.
"The game is up and running on Xbox 360 - it has been for a long time, and its running wonderfully - it just doesn't have any Xbox Live written into it yet so that's the work that remains."
That would be awesome, and I think the next stop for Xbox Live. I can understand Microsoft's wariness about allowing user-generated content on Live, and after the dumb-ass law suit for the live outage, I'm sure they are imagining the user-backlash if such content did have an adverse affect on consoles. Perhaps that is one reason why the PS3 can support this feature; it's online service is free, if you download a bad file and crash your PS3, there's really no one to complain to, though I'm sure they would still try to sue Sony or Epic or both for something.
Anyway, if Microsoft truly wants the 360 to replace the PC as the ultimate gaming machine, they need to support user-generated mods, or at least consider this feature in the future.