The next time you boot up your Xbox 360 to watch an HD DVD movie, the machine will ask whether you want to update your HD DVD playback software or not. You'll want to answer yes, since, you know, improvements are great.
The complete list is after the jump, but the important bits are 1080p over HDMI, improved networking and improved title compatibility. There were a handful of titles that had problems being played back on the 360's HD DVD drive, which should hopefully be fixed now.
Added option for user to select from the following audio output formats via TOSLINK or HDMI:
o Digital Stereo (2 channel PCM)
o Dolby Digital 5.1
o DTS 5.1
o WMA Pro
Added "Dynamic Range Control" toggle for digital audio output
Improved HD DVD networking support
Improved HD DVD title compatibility
Improved performance with MPEG-4 AVC / H.264
1080p via HDMI is supported on the Xbox 360 Elite with HDCP compliant displays
Improved parental controls