For people who don't want to read a lot of waffling text, here are the two things I think MS needs to do for XNA:
1. Introduce quality control for XBLIG (make it more like an app store/hub)
2. Add native code support for WinPhone7
The placement of XBLIG in the new 360 dashboard has caused a bit of a controversy (http://gamasutra.com/view/news/31298/XBLIG_Developers_Troubled_Over_Xbox_360_Dashboard_Update.php). It is debateable whether or not this will cause any lasting harm to XBLIG.
There are those who think that the new location will actually increase sales, but we won't really know until sales data for this month becomes available. What this has done though is show the amount of resentment in the XBLIG camp towards the treatment they have received from MS.
I have been a casual XNA developer for a while now; meaning that I dabble, but fairly aimlessly and with no intention of releasing anything. I am firmly in the hobbyist camp of XNA developers, which comprises IMO by far the majority of XNA developers.
When XNA was originally launched it seemed like MS would make a push for it to be adopted by professional developers. This never really happened though. There are some exceptions, but as a whole XNA is not seen as a viable platform for professional development.
The fundamental reason for this is that XNA forces developers to use C# and .Net, so it requires a substantial tech investment, as most devs can't reuse ANY of their legacy code.
I've written before about the benefits of high-level languages in game development, and .Net/CLR in particular (http://gamasutra.com/blogs/ChrisHowe/20090808/2701/An_Argument_For_Mono_In_Games.php). Although I'm a fan of C#, the CLR and .Net, it is important to give developers a migration path that allows them to transition gradually.
This requires the ability to mix .Net and native code, similar to the way that the NDK allows developers to mix C
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