In an update to Microsoft’s Terms of Use and Code of Conduct policy, Xbox 360 gamers are now allowed to create profiles that use the words gay, lesbian and transgender, something that previously frequently resulted in suspension of accounts for what gaymers were told was “offensive.”

“I’d like to announce an update to the Xbox LIVE Terms of Use and Code of Conduct which will allow our members to more freely express their race, nationality, religion and sexual orientation in Gamertags and profiles,” wrote Marc Whitten, Xbox Live general manager, in a letter on the Xbox Web site. “Under our previous policy, some of these expressions of self-identification were not allowed in Gamertags or profiles to prevent the use of these terms as insults or slurs. However we have since heard feedback from our customers that while the spirit of this approach was genuine, it inadvertently excluded a part of our Xbox LIVE community.”

Rockstar is being coy about the amount of gay content – Tony is described in preview clips as a character who owns both gay and straight clubs, and gamers won’t be playing as Gay Tony, but as his assistant.

The trailer does seem to be offering reassurance to straight gamers that there will be plenty of straight content, but on the other hand Tony doesn’t seem to be a caricature.

The debate over whether or not this is progress is interesting. Having a visible, respected gay character in a game that’s marketed to mainstream audiences could be an important step.

On the other hand, the GTA series has been slammed over and over for its over-the-top violence, and Rockstar seems to be almost proud of the misogyny that runs through the series.

Will this be a sly way of getting young gamers comfortable with people in the LGBT community, or just cringe-inducing? It should be interesting to follow.

You can view a preview trailer at Gamefocus.

Electronic Arts and the other companies are holding the panel to try and find out ways to create more gay friendly games and put a stop to such behavior.

“These companies aren’t monoliths and are very much committed to providing a safe and fun environment for all their players – they’re just not all there yet,” wrote Justin Cole, the Director of Digital & Online Media for GLAAD and moderator for the event.

According to Cole, a 2006 University of Illinois survey of gay gamers found that 52.7 percent of those surveyed said the gaming community is “Somewhat Hostile” to gay and lesbian gamers and 14 percent said “Very Hostile.” As for the common insult “That’s so gay,” 87.7 percent of those surveyed said that they heard the phrase while gaming.

Cole also said that the gaming companies could make it easier for gamers to report such bullying, and to no longer prevent the use of the word “gay” or “lesbian” in games, which often prevents users in games to self-identify or create gay and lesbian groups and forums.

The panel is free to the public and takes place Saturday, July 18th, 2009, 11am – 1pm at Electronic Arts, 250 Shoreline Drive Redwood City, CA 94065.

Read the full San Francisco Chronicle story here. To find out more information about the panel, visit GLAAD’s website here.

According to the rep, the XBox ban on using the words gay and lesbian was inspired by the pejorative use of that word in 92% of profiles brought to the attention of administrators. So, it’s an anti-discrimination policy.

The future of Xbox forums will include some method of identifying sexual orientation in gaming profiles (good luck with that one), but the development of relationship/orientation options will take time. The rep did not agree to re-instate Teresa, arguing that insufficient details were provided in her original post.

* as an aside: Teresa, send us your details and we will forward them to Microsoft. Alternatively, send them to Microsoft and let us know how they respond*

So, Microsoft did not exactly apologize for the treatment of players on its site. It did, however, agree to open up a space for gay players in the future. Whether this will do anything to curb the obvious harassment experienced on these sites, we have yet to see. What was accomplished, was a recommendation for all gamers experiencing homophobic harassment to post complaints about users on xbox.com.

I know I will be monitoring that site as will many others. Maybe the next XBox user kicked offline will be the cause of the intolerance rather than its victim.

When I worked as an intern at a news magazine in New York I wrote a story about a video game called “America’s Army.” It was an online war simulator sponsored by the U.S. military to assist with recruitment efforts. The graphics were the best in the business and the online community was robust and carefully managed. Still, the things I heard on that site during our office’s testing period were incredibly offensive.

If I had been forced to play on a team with another racist crazy kid screaming about “ragheads” I would have quit journalism altogether.

So I guess I’m not surprised that a gamer who identified as a lesbian on an XBox live online gaming community was harassed and eventually kicked off the site. I expect nothing better from gamers.

What does surprise me is that Microsoft is doing nothing about this kind of activity. They are permitting their subsidiary to ban out gay players because of the “offense” it causes others. This is the classic argument for banning most gay activity, including gay straight alliances in high schools, gay pride parades etc.

I am also shocked that the HRC, an organization desperately in need of street cred with the LGBT community, refused to assist gay gamers in their quest for access to XBox live forums. Since when does Microsoft get a pass?

Being gay is not offensive. Identifying one’s identity in their profile is not offensive. XBox players and moderators are offensive in their ignorance and discriminatory actions. And the HRC, well I’m tempted to just write them off as gutless.

So who will fill the void the HRC leaves? We are hoping for some real leadership…

This week they’ll be covering the usual viewer feedback, showing some sneaky snow photos and reviewing three massive titles. Metal Gear Solid 4 gets put through the mill and Guitar Hero on Tour and SingStar Vol. 2 are also covered.

It’s a massive episode, featuring both kangaroos and disco lighting.

The episode has lots of special effects talk, from 3D horror moments to outrageous stunts. And of course, the usual helping of geek chat, gaming gossip and the ultimate cliffhanger ending to round of the first season.

There’s also clip of Tracy playing in her PJs, a home-made rock band in action, and the usual viewer feedback, topped off nicely with Site Guff and some insights into rhythm games and bodily functions.