Apple could force their hand though.
Zune was already trying to mark out a section of the iPod market for itself, I have no idea how that's going, but iPod has already moved into phones and now gaming, so I think MS would have to do something crazy to even compete.
Windows Mobile 7 is their phone platform.
-it plays games and it has apps. Currently sitting at 3rd or 4th in the market behind iPhone, Android and possibly Palm Pre
Zune is their Portable Media Player
-Plays music, movies and a limited amount of games.
MS has invested in 3D tech a while back, but the would have to merge their XNA developing platform with WM7 and the Zune department to come up with something to compete with Apple and even then, there is no built in audience for any of that.
They will need to keep making inroads from multiple angles until they have an audience for their platform and a platform for that audience. A portable Zune360 Phone doesn't have a market that would guarantee any sort of success and therefore would be too costly to push right now.