Starting next week, Facebook, Twitter, Last.fm and instant on HD video from Zune will be available on Xbox 360 consoles, transforming Xbox LIVE into the largest social network connected to the TV with exclusive features custom-designed for the living room.

We’ve been playing with the latest Xbox 360 update for a few weeks, testing out the new social media applications, kicking the tires and generally enjoying the new features. With the Fall Update due to hit consoles this Tuesday, we wanted to highlight the good, the bad and the bugs, so you know what to expect when your trusty console updates itself later this week.

Last.fm: This is easily the killer app of the list if you happen to be a music fan. Essentially a social networking version of Pandora, Last.fm provides a legal and free streaming music service that is based on your personal music tastes. The music selection is vast and varied, with a user interface that is intuitive and easy to use. In the early weeks of the beta, we noticed a bit of stuttering when using Last.fm, but those glitches seem to have resolved themselves over time.

The only real negative to Last.fm on the Xbox 360 is that it doesn’t support background playing. Unlike the built-in media player, you cannot minimize Last.fm and have it stream music while you’re browsing the dashboard or playing a game. It’s not a huge limitation, but if there is one thing we could change about the software, this would be it. Read more