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The latest skirmish in the console wars took place this weekend, at the Mission District’s ultra-hip Foreign Cinema. That’s where Microsoft offered the gaming media a hands-on media preview of Halo 3, one of gaming’s most anticipated titles— and the company’s bid to expand their broadband audience.

Make no mistake about it, though the PS3 trails far behind and the Wii isn’t a direct competitor, the 360’s position as the HDTV-powered next gen champ is far from assured. The console has sold 10 million units to date since first launching 18 months ago, and claims six million online members to its Live service. It is hard to say how many of those are paying members, and how many are part of trial or some giveaway.

Still, those numbers are impressive, but just to put them into perspective, 10 million 360 owners represents only 6% of the total number of consoles sold last generation, and six million registered online users is tiny in comparison to the total gaming population. Granted, it’s still very early in the traditional 5 year life cycle of consoles, but the trajectory isn’t promising. Despite Xbox Live boasting the largest online console community to date, it doesn’t appear to be gaining ubiquitous traction, at least not yet.

Enter Halo 3, the jewel in their gaming crown, and the franchise the company hopes can not only boost online membership to higher levels, but bait gamers into purchasing additional downloadable content such as movies, music, TV shows, and episodic game content.

Of all 360 exclusive titles, Halo 3 is the one best positioned to do that.

How well did it succeed? We attended the Microsoft’s event at Foreign Cinema where we were treated to an open, hands-on session. The party atmosphere wasn’t very conducive to intimate gaming, but the game experience is classic, proven Halo. It plays slightly faster than previous editions, which makes frenetic gameplay situations that much more intense. There’s new vehicles and weapons, including a sweet cannon turret and missile launchers that slow down your player, but spew massive damage on your enemies. I especially liked the ginormous laser blaster with equally imposing damage. Microsoft showed off three new multiplayer levels, two of them set in two, outdoor environments, lush but limited in expansiveness. The other map was an annoying sandpit level reminiscent of Return of the Jedi. Overall, the visuals were a bit underwhelming, at least in their current state.

“It’s not going to win any awards,” said one attendee at the event, accurately critiquing the game in terms of innovation. In market terms, this suggests a game that’ll keep its existing audience, but probably not do much to expand it. Or for that matter, gain the 360 any extra edge in Microsoft’s bid to become the main digital distribution channel of the next gen living room.

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