Microsoft is releasing a major update to its Zune software and online service, and it couldn't have come soon enough.

Most of the headlines will probably focus on Microsoft adding downloadable shows, such as "South Park" and "The Office," to the Zune Marketplace for $1.99--sorry, that's 160 Microsoft Points. (No, they're still not adopting conventional currency. Argh.)

And in my discussions with the Zune team, they seem to be most excited about the new social features. For instance, your friends' Zune cards will now appear on your Zune device, where you'll be able to see what they've been listening to recently and even play those songs if you have a Zune Pass subscription. Of course, the playlist feature's always been really buggy for me--as I write this, the playlist on the right side of my profile here is 13 days old, and I've listened to many songs since then and synced several times. But I suppose these social features could eventually give Microsoft a leg up against the iPod, if they can get them all working properly and keep adding ways to discover new music. For instance, I'm not a Zune Pass subscriber, but I'd still love to be able to sample songs on my friends' playlists directly on my Zune (Microsoft says the content owners put the kibosh on this idea) and then download them wirelessly from the Marketplace (wireless downloads aren't yet available).

TV and social improvements aside, I'm actually happiest about the basic fixes that Microsoft is making to the Zune PC software. As I've mentioned--and CNET's Molly Wood recently wrote about--one of the biggest problems with Zune has been the software. The first version, based on the Windows Media Player and released in 2006, was actually more useful than the client they wrote from scratch and released a year later. In other words, the upgrade was, in some respects, a downgrade.

I haven't had a chance to test it yet--the software update will flow automatically to my PC some time tonight--but Microsoft promises the following :

Metadata editing--it'll be much easier for users to change things like artists' names and genres from within the Zune software. (This was my biggest complaint about the 2007 software update--I actually had to download another app, MP3Tag, to get the job done.)

Automatic playlists--you'll be able to create playlists (like "all songs added since 1/1/2008) that update automatically as you add new songs--a feature iTunes has had forever, and that Microsoft removed in the 2007 update.

Sort by genre--another removed feature that's been restored. Gapless playback on both the software (a longstanding iTunes standard) and the device itself (the latest iPods also have this, but the Shuffle and my 4th generation iPods don't).

Sync improvements--the software can now sync content to multiple Zunes simultaneously, and create separate sync lists for each device.

There are other improvements in the software as well, including better integration between the PC client and the online social community. As soon as I get the software, I'll post some hands-on impressions.

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