Xbox 360 owners who log on today for their daily dose of Fable III, The Force Unleashed 2, Fallout: New Vegas, or Try Not To Fart (an awesome Indie game that’s getting a free plug here for no particular reason) will have to first download the new fall update for Xbox Live.  The quick download is well worth it, however, as it includes several new features, as well as a few enhancements to existing services.

In addition to Kinect functionality, which is the real impetus for the update, the whole dashboard has been redesigned, Avatars have been tweaked to look more realistic, and ESPN3 has been added to the service.  Zune integration has also been improved, as has the audio codec for voice chat, which should result in clearer conversations with your Xbox Live friends (and enemies).  Most interesting to me, however, is the addition of a search function to Xbox Live’s Netflix interface, making the service just as full-featured on the console as it is on the PC.

There are other tweaks, like Gamertag suggestions, new parental control options, and a new in-dash virtual keyboard, which are all listed on Major Nelson’s blog, and are well worth checking out.  With Microsoft’s recent price increase for Xbox Live, they needed to add some new functionality to soothe the pain of paying even more for what Sony and Nintendo offer for free.  I’m not sure if this update covers it, but it’s at least an improvement.