With the Xbox 360, Microsoft has done a lot of things right. It’s made smart choices about the future of high-def, delivered a strong development kit to keep game creators happy, and of course, birthed Xbox Live — which did so much right from the beginning, five years ago, that the competition still hasn’t been able catch up. But there’s always room for improvement. As the new year rolls around, we humbly submit a half-dozen action items for Microsoft:

1. Fix the DRM glitch

There’s this secret problem — anyone who has it hates it, and the rest of the world is in danger of it happening to them. When you buy, say, an Xbox Live Arcade game, the digital-rights management ties that purchase to both your Gamertag and your console itself, on a hardware level. It’s to stop people from copying games to friends’ hard drives, and we understand the need to prevent piracy before it starts. But the problem is that red ring of death. If your console breaks — or if you simply decide to upgrade your console to an Elite or the Halo 3 Special Edition — the digital-rights management (a.k.a. DRM, a.k.a. anti-piracy encoding) doesn’t detach from the old hardware, and it doesn’t know how to mate with the new machine. The only way to play the XBLA games you’ve bought, then, is to be logged in. That’s a problem for any users who don’t have a home network, who find themselves stuck with trial versions of the games they “own” until Mom’s done surfing the internet on the PC and surrenders the Ethernet cable.

It’s also a pain in the ass for two-gamertag households. Consider this very common scenario: Gamer A and Gamer B live together. (They might even be married — the ultimate multiplayer experience!) Gamer A bought Puzzle Quest, knowing Gamer B would love it — and she did. So they each played independently, until the three red lights showed up. After the console came back from Microsoft’s repair lab, suddenly, Gamer B couldn’t play Puzzle Quest — or any of the games Gamer A bought on his account. Part of the “fix” was to (accidentally? intentionally?) lock out anyone but the purchaser. Welcome to the direct-download future: You can borrow your spouse’s Halo 3 disc, but you can’t play their XBLA games.

Microsoft knows about this DRM problem. When the Elite came out and consumers faced a hardware swap by choice instead of by malfunction, Albert Penello told us on episode 58 of the OXM Podcast that Microsoft was aware of the issue but didn’t have a fix yet. “We don’t have a solution for that right now; we are working on something,” he said. That was March 2007. What’s up?

2. Let’s See Some XNA Stuff Already

The XNA program launched in August 2006, but we’ve seen very little in the way of fully realized, user-created Xbox Live games. But don’t get us wrong — we’re so behind XNA that we can’t see over it. But after the “four teams make four games in one week” challenge back at the 2007 Game Developers Conference and seeing so many indie games, well, we’re wondering why we’re getting Xbox Live Arcade advergames like Yaris instead of more stunners like Aegis Wing. This is the single most dream-enabling, user-empowering part of Xbox culture right now — we want to see it take center stage in the commercial arena, and not just as a theoretical test bench. If some of the garage and hobby programmers need a little help getting to the finish line, we’d like to see Microsoft take a proactive role, then reap the rewards.

3. Clean Up Behavior on Xbox Live

The biggest threat to Xbox Live is the user base itself. We know a secret police force patrols the Live beat, but ask any gamer about online play and they’ll inevitably tell you about the time they were called a rude name with two g’s in the middle. Why are these jerks the most vivid multiplayer memory most of us have?

The Rep and complaint system is easy to use, but more consumer education wouldn’t hurt — a lot of people don’t realize what kind of power is at their fingertips. Plus, there’s more to bad behavior than you can currently catalog: with only 13 complaint categories, there’s a lot of room for creative new ways to ruin other people’s fun — does “sang Top 40 hits in my ear the entire match” count as “threatening,” “hateful,” or just freakin’ annoying? It’s not as morally offensive as hate speech, but it does make us not want to play with strangers. Two years after launch, it’s worth updating the user-feedback system for more specific violations.

How do people know the real-world police are at work? The existence of jails. We don’t expect (or want) anyone’s privacy to be violated, but it’s worth crowing about the digital dimwits and cyberracists who have been slapped down, to send a message to those who think there are no penalties for bad behavior on Live.

4. Don’t Sully the First-Party Software Stable

Microsoft published some sweet first-party games in 2007 — Halo 3, Forza 2, PGR4, Blue Dragon, and Mass Effect were all standouts. But it also backed some surprisingly prominent stinkers with Tenchu Z, Fuzion Frenzy 2, and Vampire Rain. The emancipation of Bungie and EA’s acquisition of BioWare gives industry watchers a reason to cock an eyebrow, too. Meanwhile, Super Mario Fill-In-The-Blank gets greeted as a generous gift from a higher power because, well, first-party Nintendo titles have historically been high-quality affairs. In this fierce console race, Microsoft should be trying to make every house-branded game a winner, rather than tainting its name with needless, mediocre offerings.

5. What Happened to Customization?

“We’ll be showing five or six (faceplates) at E3,” said J Allard in an interview with CNNMoney.com in May 2005. “We’ll have 10 or so at launch. And that number will be in the hundreds within a year or so.” Clearly, plans change. If the things simply don’t sell, fair enough — but let’s think software. Why not let us change the startup sound on our consoles, not to mention the sound effect of switching between blades? We’re thinking it should just be another element of a theme that could be tweaked by the user — for a Guitar Hero theme, for instance, add single-note stings or string squeaks every time you flip between panels.

We dream of an Applesque “Xbox Genius Bar” — a retail destination where you could take your 360 in for an appointment and have it truly cosmetically customized to your exacting standards. Imagine LEDs, airbrushed art, transparent panels, and all the other fun PC gamers get to have, all installed on your 360 by a non-warranty-voiding, Microsoft-approved hot-rodder. But if that’s too much to ask, hey, all we really crave are choices beyond black and white. We’re the people J was talking about when he referenced “Generation Remix.”

6. Quality Control — Now and Forever

Let us never see another Red Ring of Death. Let us hear no more about steering wheels that smoke. Whatever design issues led to these high-profile hardware problems, let them be banished forever. Once it became clear that it wasn’t a handful of isolated incidence, Microsoft acted commendably in dealing with the problems, even if users were angry that they happened in the first place. But now, the only way to avoid hearing the “three red lights” punchline for the rest of the console’s lifecycle is to make damn sure it doesn’t happen in the future.