I'm not sure why, but Microsoft seems intent on crippling XNA for the 360. Perhaps they want to sell more dev kits.
I recently had some more time to work on my little toy project. After some work, I've now got a deferred lighting implementation on the PC.
For the lighting buffer construction, at first I was using a tiled approach similar to Uncharted, which did not require blending during the lighting stage. It did work for the most part, and allowed me to use LogLUV for encoding the lighting information, which was faster. But it had issues - I didn't have any lighting target ping-ponging set up, so I was stuck with a fixed limit of seven lights per tile. Also, even with smallish tiles, you end up doing a lot of work on pixels not actually affected by the lights in question. So I wanted to compare it to a straightforward blending approach, and switched back to an FP16 target, and render the light volumes directly (using the stencil approach detailed in ShaderX7's Light Pre-Pass article).
So this all worked great and my little toy is rendering 100 lights. Of course, on the 360, there's a problem. Microsoft, in its infinite wisdom, decided that the FP10 buffer format on 360 would blow people's minds and it is not supported in XNA. They are using an actual FP16 target, which does not support blending.
So I guess it is going to be back to alternate lighting buffer encoding schemes, bucketing, render target ping-ponging for me. It's not a huge deal, but it is frustrating.
It is a real shame that XNA gives the impression that the 360 GPU is crippled, when in reality it is anything but. Couple lack of FP10 support with inability to sample the z-buffer directly, and the lack of control of XNA's use of EDRAM, and they've managed to turn the 360 into a very weak, very old PC.
Least common denominator approaches generally haven't fared that well over the years. An XBLA title implemented in XNA is going to be at a fundamental disadvantage -- I don't think you are going to see anything approaching the richness of Shadow Complex, for example.
At the end of the day, Microsoft needs to figure out where they are going with XNA. If they are going to dumb it down and keep it as a toy for people who can't afford a real development kit (people who've been bumping into these low ceilings much longer than me), then they should keep on their current path.
The potential for XNA is really much more, though. Today I wrote a pretty decent menu system in about 45 minutes, that handles gamepad, keyboard, and mouse input seamlessly. I don't think I could write that in C++/DirectX anywhere near as fast. If you start looking down the road to future generations of hardware, I'm not worried about the overhead of C# being fundamentally limiting. Games today already use much less efficient scripting languages than C#, and while you are limited to the heavy lifting Microsoft has chosen to implement for you today, who is to say that a future version of XNA couldn't allow shelling out to C++ for really performance intensive stuff?
XNA has a chance to become something really great that would be very powerful for a large class of games. It remains to be seen if Microsoft will let it.