The newer ones don't have anywhere near the failure rate, however, they do still fail. Mine has red ringed once. No big deal, though, They send you a box, postage paid, you mail it off and they send you a repaired one. Mine was a year old before it red ringed. I sent it off on a Monday and I got it back that Friday.
I have both a 360 and a PS3. The PS3 is a much better piece of hardware, it is whisper quiet and built like a nice piece of high end home theater equipment. That being said, the only thing I use it for is watching Blu-Ray movies.
The best game, as far as fun and playability on either console, is Halo 3. There is nothing like the experience of Halo 3 multiplayer with your friends. I just picked up GTA IV on the 360 (I would've gotten it on PS3 but all my friends have 360s and to me gaming is very much a social activity). It's fun, but I can tell you that in a month or two I will put it away and go back to playing Halo 3 virtually every day. Halo 3 alone is worth buying a 360 and putting up with the occasional (as in once every three years or so, now that they've somewhat fixed the problem) trip to the shop.