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You can get the arcade and pick up a 20g on e-bay, craigslist, ect, for between $20-30. This puts your arcade at $230 with BC. MS will send you a disk for free, or you can just go on Xbox.com and burn the B/C files straight to a CD and pop it in the 360 for free also.

Still saves you $$$. I had a 20g for a longtime before I got my Elite and it had 43 arcade games, 14 hours of music, video, including B/C on it, all my saves, and still had room. I wanted the larger drive for the full game downloads and netflix. But for you, 20g should be plenty good, and plenty cheap lol.