"[..] Microsoft has confirmed that it will release no new versions of its XNA game development toolset, which all Xbox Live Indie Games are developed in."
The system is not backwards compatible, because it apparently is a rebuild from the very core. The old code that drove previous games will not run on the new system, and anything being written for it must be written or ported to whatever the new languages and requirements are.
If they don't publish an update to the toolkit that lets indie developers write for the system, doesn't that essentially mean there can't be any indie development for the system? It looks like they're basically saying we'll keep things just as locked down as they used to be, oh and also we won't be providing the necessary tool to even begin working on our system. (Unless they intend to release a new dev-kit and just didn't see any reason to note that?)