Was talking to one of the XBox team at work today and he mentioned that Microsoft had announced an update coming on April 6th that would enable support for USB memory and disk devices, up to 16Gb in size.
I searched around and found confirmation from Major Nelson here. (image also from Major Nelson)
You will be able to configure 2 devices for up to 32Gb of USB memory storage. Since you can pick up new 16Gb USB sticks for under $30, this great, and real alternative for anyone that either doesn’t have a hard drive or wants to supplement the storage with a more mobile alternative.








