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pbroy said:
There is a diffence between the size of downloadable retail games vs. retail games. when you install a retail game to HDD, it copies all of the files, including dummy files. Your 360 isn't smart enough to determine which files can be left out. I'm pretty sure that the full games to be released for download will be stripped of these dummy files and compressed into a nice little package. They should take up much less room than normal HDD instals

This could be true.  I also like the options of using a 320GB or 500GB so long as they don't make such a premium on HDD prices.  They could also shange the storage all-together like mrstickball suggested.

I think they definitely have something planned as far as storage and I believe it will be released along the same time as this new Games on Demand and before the updated marketplace.