I really don't know where that came from...
Quote:
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"At launch, Xbox 360 will be backward compatible with the top Xbox games," Xbox PR manager Michael Wolf told GamesIndustry.biz today. "Our goal is to have every Xbox game work on Xbox 360. You will NOT need to purchase a new 'version' - your original games will work on Xbox 360."
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Every article I've read seems to indicate that the 360 will be backwards compatible. How exactly and at what cost, nobody seems to know, but Microsoft is sure that it will happen.
As for the controller question...
The two new shoulder buttons on the top, at least according to the few websites I hit, will serve as the black and white buttons for the older games.