The first item makes a bit of sense if you think about where Microsoft is coming from. Let's face it: to the general public, Microsoft is not a games company, at least not in the same way Nintendo is. Microsoft is the company behind such decidedly uncool things as Windows and Excel. So, what they're attempting to do is to show that with the Xbox, they are first and foremost delivering a games machine, and thus not fall into the same trap Sony did in Japan with their PlayStation 2.
In Japan, the PlayStation 2 flew off the shelves, but individual game sales have been somewhat disappointing. This has been attributed to the idea that most people in Japan bought the system because it was a cheap DVD player. In Japan, prices on standalone players haven't come down as much as they have in the United States, so the PS2's DVD playing abilities were a major draw. Instead of doing this, Microsoft is planning on releasing a separate add-on at launch that will allow you to play back DVDs and will also include an IR receiver with a corresponding remote control (which will be necessary to watch movies, as the gamepad will not perform any DVD functions).
The second controversial announcement was a little bit troubling, but really only on paper. Microsoft lowered their official Xbox specs list to show a drop in the graphics processor speed from 300 MHz to 250 MHz, the DVD-ROM speed is now listed as “2x to 5x” (which next to the PS2's dedicated 4x is somewhat odd), and their maximum polygon performance was lowered to 125 million per second.
When all is said and done, these changes will likely go unnoticed by gamers. The closed-box architecture of a console system means developers can squeeze much more performance out of lower hardware, and these specs are still extremely impressive. Try to remember that no matter how similar the base architecture, the Xbox is not a PC, and has no operating system overhead, no bulky drivers, no ICQ running in the background, and so on. You won't be tweaking those extra FPS out of Quake III Arena on the Xbox – if it's implemented right, it should already have a rock solid framerate (although multiplayer Unreal Tournament on the PS2 shows that it's still a challenge to keep that framerate constant no matter what the platform).