This week, Microsoft surprised its Zune customers with an upgrade to the Zune PC software, bumping the version up to 4.2. Why was this surprising? Well, Microsoft did provide a heads-up about a system outage earlier in the week, but it wasn't supposed to be accompanied by an update of any kind. And when that update did arrive, it quite obvious included some interesting new functionality, though Microsoft refuses to even comment on it for some reason. And finally, there are clues in the installer files for Zune 4.2 that Microsoft is about to start supporting some mysterious new hardware devices that might or might not be the fabled Zune Phones.

Given the speculation around this release, I thought I'd take a closer look. But since Microsoft isn't talking, it's like that I'll have to update this article over time as more Zune 4.2 features become known. Here's what I know so far.

New features and changes

The week of the 2010 Consumer Electronics Show (see my coverage), Microsoft contacted me to tell me about some updates it was planning for the Zune platform. Key among these was the addition of the Smart DJ feature on the Zune HD, support for the MPEG-2 Part ASP video format, and the development of a Facebook app for the Zune HD. These features would be delivered sometime early in 2010, I was told.

The Zune 4.2 PC software apparently delivers on the second of those three updates only. But it includes other features as well.

New video format support

According to readers, Zune 4.2 also added support for two other video formats: XVID and AVI. (Oddly, Microsoft did confirm to me that XVID was "coming in a later update" when I asked about this, but it appears to work now.) What's missing in all this is device compatibility. The Zune HD firmware hasn't been updated (yet?), but presumably that is required for MPEG-2, XVID or AVI files to be synced to the device. (Classic, pre-Zune HD, devices do apparently get a firmware update with this release, however.)

Windows 7 Library support

If you install Zune 4.2 on Windows 7, you'll discover some interesting and wide-reaching changes. Instead of manually monitoring folders for music, picture, video, and podcast content, as did all previous Zune software versions, 4.2 actually integrates with the Windows 7 Library system, much as do Windows Media Player and Windows Media Center on that OS. Even more intriguingly, Zune 4.2 actually adds a fifth Library, Podcasts, to Windows 7.

Zune 4.2 PC Software

This change works as expected, but in my case it blew away some sync folders since I prefer to sync particular folders and not the entire contents of my Music, Pictures, and Videos libraries with the Zune. It's not a big deal to work around this, but where older Zune versions let you manually manage monitored folders, the interface in Zune 4.2 actually manages your Windows 7 Libraries, so any changes you make will affect other programs, not just the Zune. So be careful with that.

Zune 4.2 PC Software

Other small changes

There are a number of other small changes throughout the Zune PC software. It enables digital albums in the Zune Marketplace that can include one or more videos in addition to music. (As with iTunes.) There are two new localized languages, German and Italian. The Software Privacy setting has been renamed to Feedback Program, and the Device Privacy setting has been renamed to Error Reporting. Nothing major.

About that mysterious Phone rumor

When Zune 4.2 first appeared, Australian blogger Long Zheng examined the INF file associated with the 4.2 installer and discovered references to three unknown Zune devices (in addition to all known current and previous models). Later in the file, the INF for the first time divided the device types into both "Zune" and "Phone." (Previous versions only noted the Zune type.) Zheng said this was proof that the fabled Zune Phone--a supposed variant of Windows Mobile that looks and works like the Zune HD--was real.

I'm not so sure, and as we discussed this over IM the other day, I became increasingly positive this wasn't the case at all. And when Tom Warren over at Neowin asked Microsoft to comment on this development, he received the following quote:

"As far as a 'Zune phone,' we have no plans to create a Zune phone," a Microsoft representative said. "It makes sense that someday Zune could be part of a phone experience, but there have been no announcements about how or if that will happen."

As I wrote in WinInfo this morning, it's far more likely that Microsoft is working under the covers to add support for Windows Mobile and/or Danger phones to the Zune PC software, which would allow users of those smart phones to more easily access Zune content. (Windows Mobile devices are already compatible with Zune subscription content, although Microsoft has been quiet about that capability for some reason.)

That Microsoft is working to meld Windows Mobile/Danger and Zune is, of course, just speculation. But with Mobile World Congress and an expected unveiling of Windows Mobile 7 occurring next month, many tech bloggers and reporters are starting to pay more attention to Microsoft's mobile moves. (As am I.) And although the oft-rumored Zune Phone is a fun target, Microsoft has more pedestrian releases that are definitely happening in the weeks ahead, including some important updates to Windows Mobile 6.5. Given the very basic media capabilities in that OS, it makes a lot more sense that Microsoft could be shoring up its existing products rather than prepping the Zune PC software for some supposed new phone.

For now, we just don't know.

That's all for now...

I'll be keeping an eye on Zune 4.2 news to see if anyone discovers any other unexpected features or functionality. Stayed to this site for any updates.