mike_intellivision said:
Actually, I think Microsoft says it does -- at least indirectly: http://www.xbox.com/en-US/support/hardware/memoryupdate/default.htm Find more entertainment at your fingertips than any other device connected to your TV, instantly streaming movies from Netflix*... *Requires additional 8MB of available storage and Netflix membership.
Also, to add to my position (also from Microsoft): Hard drive recommended for LIVE, and is required for some features. LIVE Gold membership and other fees may apply. Netflix sold separately. See xbox.com/live for system requirements. In order to connect to Xbox LIVE and enjoy everything the new Xbox Experience has to offer, you will need an Xbox 360 Hard Drive. While you can connect to Xbox LIVE using an Xbox 360 Memory Unit with 128MB of available space, you will not be able to enjoy all the great features like Xbox LIVE Primetime and video downloads.
... Since I do not have a 360, all I have to go on is what I have been told and what research I can do. If someone is spreading misinformation, it would be Microsoft (and not the first time, I had to open up IE because I could not cut-and-past with Firefox).
Mike from Morgantown
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**that 8mb of storage can come from a memory card, no HDD required (which comes with the Arcade unit).
And the Arcadae is already below $200, it's $199. 
