In this week's Developer Diaries, Microsoft unveils some juicy new shots of the upcoming Dashboard, currently scheduled to hit LIVE some time this fall.

The new Themes have been redone to include some animation, with the word "dynamic" being thrown around several times throughout the entry.  Bottom line is that Themes will do more than just be background images.  Here's the Underground (top) and Signature (bottom) Themes on the Dashboard and Friends Channel:

In the second image, there's an example of how Avatars can interact with the Theme.  Each Avatar is standing with their own little "graphic or environment," which will change depending on the selected Theme.  The animation also varies by Theme; for example, in the Signature theme, the bubbles in the background will be shifting and migrating around while users navigate their Dashboard.

In the Friends Channel, users can rally their friends' Avatars by hosting a LIVE party.  The Avatars will be able to emote and wave you over.  If they're offline, their Avatars will be asleep.  A rather cute addition, if I do say so myself:

LIVE members can rest assured that their existing Themes can still be used in the New Xbox Experience -- of course, they'll be altered to fit the new UI.  This is how the Gears of War Theme will look after the NXE update: