VG247 is reporting that Xbox 360 owners "may" get the ability to customize their avatar's content, noting that it was too big of a job to worry about back at the NXE's release last year.
The Avatar's designer, Dale Murchie, said, "User-generated content is a huge area that would not have been done any justice if we had tried to cram it into the launch release of this project". Then he hinted, "There may be features coming that open up the expressive potential of the Xbox community, but we're keeping quiet on that for now."
This is an important step for Microsoft if they wish to bring Avatars more into the foray of the Xbox 360's NXE, because at the moment they, while being compulsory, can't be customized as much as some would like. This could all change because the head of Art for Avatars, Lee Musgrave, "Creativity is going to play a big part in the development of the Avatars."
No word yet of any release date for this update, or if it is indeed under development, but these quotes are good signs of what's to come for Avatars.