The "rumors" were true ... many gamers that bought the X-Box were treated to hardware and software failures ...
The total number of broken machines isn't even 1% of the over one million machines Microsoft shipped for their console's launch, but it's at times like this that one of the most important parts of a company are tested.
The Customer Service Department.
Microsoft has hired several different companies to handle the cutomer service for the X-Box, but frequently, records aren't shared between the companies, and customers will occasionally get mixed information from them.
Some users with flawed machines recieved prompt service and replacements, others had waits approaching a month long, and were unable to receive information about their problems.
There was apparently no specific problem with these broken machines, nothing that could be traced back to a production problem, but that doesn't make the owners of the non-functional consoles any less upset.
In all fairness, Nintendo has also claimed a failure rate of it's GameCube console of less than 1%. However, owners of broken GameCube machines have been far less vocal about their problems, likely due to the lower cost of the GameCube compared to the X-Box. It also may have to do with the fact that the X-Box age group skews older, and those users are more likely to complain vocally than the GameCube's younger age group.