This is a pretty bold move by them. They're essentially getting rid of all the changes to the DRM set up from the 360 (which also has DRM; this isn't a complete removal), including all the beneficial changes. Of course, they weren't that compelling to me and introduced a lot of confusion about how they would work and exactly what limitations would be put in place.

Looks like they're still going to struggle with the Kinect privacy concerns, but that's more of a PR battle than an actual privacy one. You can turn off Kinect, but you couldn't turn off the Xbox DRM system.