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RSSAs one of Josh's commenters noted, bringing Facebook onto Xbox is of limited utility. Without an easy-to-use keyboard, at least as easy as a mobile phone keyboard, for example, the main use for access to your Facebook account on Xbox Live will be to ping friends to come join you in-game, or to show off your gamer score.
But the addition of social-networking functionality could well solve a significant problem facing console multiplayer gaming -- the current matchmaking system. While usually effective at setting up games quickly and easily, it makes it very difficult to be discerning in one's choice of gaming partners. Anybody who's played Halo 3 with a group of people who use ethnic slurs like punctuation marks has had this experience.
Currently, Xbox Live is well set up to support playing with friends or playing with strangers, but there isn't a lot of gray area between those two groups.
There's no way, for example, for someone at a company to play with all his or her co-workers unless he's friends with all of them, or for a student to play with other people from his or her university. Xbox Live is good at helping you set up 1- or 2-degree social nets, but its support for groups or larger networks is practically nonexistent.
This is something that connecting with Facebok could shore up. The real value for Xbox Live to hook up with Facebook isn't in broadcasting activity. The value is this: It pulls social connections into the Xbox Live system to help people find fellow gamers they can get along with.
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Microsoft should really build out a cusomized interface, which would live on the XBox Live (or PSN Network), but would marry the data stored on these social apps (like FaceBook/Twitter) seamlessly into the already existing console experience. Though, I can imagine that this would be difficult to do, from a logistics standpoint.
There's a game on the iPhone I've written about before that uses Facebook Connect to populate quiz trivia. Status updates are one of the most popular activities on Facebook, and I'm sure you can bet there will be an option to have your achievements pop up on Facebook as you get them on Xbox.
There are also HUGE opportunities for marketers in this move, but from a consumer perspective, it's going to primarily be expanding the Xbox LIVE friend networks and pushing content back from the console to Facebook/Twitter.