Actually I think more of it was that it's only recently (within the last year or two) that PSN and XBL have been open to having actual updates pushed to games. Valve sort of gave up on all of that, as did a lot of game devs, because XBL at the very least would insist that any content updates come as part of a DLC that they could make money off of. They didn't like patches that weren't just bugfixes. :/ So it just wasn't feasible at all for Valve to bring updates to TF2 that way. But ever since Super Meat Boy, I think, XBL's been okay with regular/free updates which is probably the only reason Minecraft has seen the light of day on it.
It isn't so much that MS only wants free updates that are bugfixes, since Burnout Paradise got a ton of free updates that added stuff to the game. From what I've heard, they won't allow anything that adds achievements without charging for it - that's why the DLC for the 360 version of L4D/2 costs money while it's free on the PC.
