If the rumour was true, Microsoft has no reason whatsoever to confirm it and all the reason in the world to deny it. As the program has been cancelled and was never fully clarified, they can say whatever they want. Regardless of what was actually being said in meetings, this was the most likely official word.

That said, if MS is telling the truth, I have to wonder if publishers were as strongly behind Microsoft's decision to 180 as the internet DRM backlash. It's possible they'd feel more threatened by organized player sharing circles than by the used game system as it currently exists. Something similar probably happened to the sharing-esque scheme that Sony implemented on PS3, which was heavily reduced in functionality after its initial release.