Spent the day considering this, reading opinions around the net, and watching it spread virally like an outbreak of the T-Virus during holiday travel times. And I just have to say the following:
1. Orth will be fired. Why? Because he caused a PR disaster; because he probably violated if not an NDA, then at least an internal requirement to not run your mouth about the company online or over social media without express say-so; because he made the job of selling always-online that much harder; and because someone has to take a trip under the bus over this mess at the end of the day. When it's just stories here and on Kotaku and Joystiq, that's bad. When it's on CNET and Reddit, that's worse. When it's front paging Forbes and HuffPo, clean out your desk and just pray Microsoft is willing to let it go at that.
2. Those who are left behind are utterly boned. All accounts point damn strongly to always-online being required for the Durango. This fiasco not only makes it clear the user base is adamantly against that, but worse, it poisoned the well before any marketing can take place to make it attractive. It's gone damn far in a very short period of time, and worse still, E3- where Durango is likely to get the big reveal -is right around the corner. So, let's roleplay: you're a Microsoft Exec, and you woke up this morning to THIS. And as the day wore on, it got worse... and worse... and worse. So do you:
A) Go ahead with the reveal at E3 as planned, knowing there's going to be epic backlash and you may well alienate the potential Week 1 buyers by doing so?, or
B) Delay reveal & release to remove always-online... and in doing so piss off EVERY developer who was making you launch titles since they'd not only need to delay and miss out on sales, but would need to sink in extra money to make sure their games could work sans-always-online?