News Flash (drive) - 32 GB USB sticks also compatible for installs/dlc now!
re: restrictions too USB stick use - No hard or fast ones. Most everything dlc/installs will run from a USB stick, there's no limit to how many you can have, although the system will only recognize two plugged in at any one time (and a USB hub may count as one). I know some titles have restrictions as to how you can transfer the data, eg I remember some of the save data (DOAX2 for example, as they don't want "patches" from mods "embarrassing" their girls, so to speak) - but those are few and far between - I only know of that one.
That said, a 320gb hdd runs pretty cheap compared to the cost of USB sticks - but if you don't plan on heavy downloading a ton of stuff, USB sticks do fine! Most of my installs run off USB and I don't have any problems. Though make sure you use high speed ones, as performance increases greatly.
