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greenmedic88 said:

You're starting to use convoluted logic here. The Xbox HDD doesn't actually do anything but store data. It's just a hard drive. Installing it in a plastic shell so it can plug into an Xbox does not increase its value.

The only reason for the shell design was to allow MS to package it as a proprietary peripheral and charge the most consumers were willing to pay for it.

And it absolutely is expensive relative to what HDD space goes for today.

 

$199 Xbox 360: emulates Xbox games.

$129 Xbox 250GB HDD: stores data.

The bolded is the main reason why it costs that much.  Wouldn't make much sense for them to have a SKU at $300 when you could make the equivalent for cheaper by buying an Arcade and a HDD.  So they are looking at a cost of $100 at least.