Apparently the problem is so bad that the stores have drawn up form letters that explain to punters who bring back scratched disks that their machines are broken.
The letter tells the customer that they have to pay up and should try and screw the money out of Microsoft. In the meantime, the letter says, GameFly will not loan them any Xbox 360 games.
The issue of the incredible scratching XBoxes has been debated on games sites almost since the day the machines hit the shops. Microsoft has so far admitted that there is a problem 'in a small number of machines'.
More here.