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Why do you need a HDD? Demos,renting movies and downloadable content. That`s it.

For the Arcade games,you can save them on your memory card,delete them and download them again later.

For Live,the card will do.

For the saves,the card is all you need. So depends on what you want from the console. MS has a product for every market ->low,medium and high end. The choice is yours.