Well I think it should. The Arcade represents better value at $199. Most of the value in the HDD is games on demand and game installs with some movie purchases. However with 4GB and the ability to use a USB thumb drive it should be enough for Arcade and more than enough for streaming media, especially as it too has Wifi.
512MB -> 4GB represents a far greater improvement than 60GB -> 250GB. The return on investment beyond the first few GB at the moment starts to drop off precipitously. There are two big camps, the big HDD people on the right who need the 250GB and the group on the left who just want a few GB. There are more people on the left than on the right given the fact that the majority of consoles in this generation sold had less than 1GB of space. PS2, Wii, Xbox 360 Arcade.
Whilst I think the boost in the short term will be smaller, in the longer term the Arcade is more important this Christmas than the 250GB by a considerable margin.
