Microsoft has confirmed to CNET that a new version of the Zune is due for release this fall. The new model will be called the “Zune HD” and will pack some really interesting features, they might actually have a genuine competitor to the iPod touch on their hands.

The device will be based on Windows CE and feature a 3.3-inch capacitive OLED multitouch display, an HD Radio tuner, an accelerometer, and a version of Internet Explorer customized for the touch interface (I know, but just be happy it has a browser).

The devices display only has a resolution of 480×272, so interestingly the “HD” name comes from its ability to output video at 720p to a television through an optional docking station.

There has been no public talk about pricing or storage capacity at this point, just that the storage will be flash based. We’ll have to wait for Microsoft to be ready before we learn any more of the specifications (that is, unless someone leaks the information beforehand, which is likely).

The most interesting piece of the feature list is the inclusion of an OLED touch screen, it seems to add a bit of validity to the rumor that Apple would be using the same technology for the displays in their upcoming iPhone refresh. I was originally skeptical, assuming that OLEDs just weren’t ready for prime time, but if Microsoft is ready to use them in their device, what is stopping Apple from doing the same?

Update 6/2/09: Paul Thurrott has heard rumors that the release date for the Zune HD is September 5.

Update 6/3/09: From the Zune HD product page on Amazon:

“Integration with the Xbox LIVE network gives you access to millions of videos, TV shows, and games from Xbox LIVE720p HD video output to your HDTV with optional docking station.”

That’s right, it says games. This is still a rumor at this point, but it seems pretty logical to me. It’s almost as if the Zune HD is going to be the handheld Microsoft gaming console that everyone has been waiting for.

Update 7/4/09: Gear Live is hearing rumors that are stating that the Zune HD will be priced somewhere between $249 and $279, will be coming in 16GB and 32GB models with the possibility of a 64GB model later in the year, and movies are finally coming to the Zune Marketplace.

Update 8/7/09: Donald Bell of CNET has posted his hands-on impressions of the device.