Bought one at launch. It died over xmas 05 (whilst in transit) and I got a new one in the new year dated 01/01/06.
I've used it virtually every day since (also as main family DVD drive) and not a single hardware hic-up.
Best mate (and man) bought one about the same time and the DVD drive packed up last week. It was 15 months old, he phoned MS and they're fixing it for free.
At the end of the day it's gambling. Buy the 3 years for £40 and you've no worries. I didn't bother but then again I'm not worried.
It's like self diagnosis on the internet, all you see posted is worst case scenerios. Got a lump in your neck it's lymphoma, got a tight chest, you're having a heart attack, got 3 red rings, you'll have a nightmare, poor customer service and never get it fixed. Utter tripe.