Zune HD shipping with XviD support, Smart DJ this spring

Microsoft will be upgrading its Zune HD this spring, notably improved video support and smarter playlists.

According to SlashGear, new Zune HDs will soon ship with a firmware update that includes support for the MPEG-4 part 2 Advanced Simple Profile (ASP) codec as well as XviD videos. That means Zune users can play even more types of high-quality videos directly on their MP3 players or on a connected external display.

And then to compete further with Apple's Genius playlist maker in iTunes, Microsoft is debuting Smart DJ on the Zune itself (previously available only on a PC). When connected to the Internet via Wi-Fi, users are able to access and stream content from the Zune Marketplace, creating smarter playlists much like Pandora.

Personally, I've always found the Zune to be an underrated product, with better graphics and faster speed than the iPod but yet always in its shadow. This might not be the big step to overpower the Apple media player, but maybe every little bit counts.