Space the final frontier of gaming I suppose. The reality is very simple your probably not going to tax the smaller storage space in fact you probably will not find any great use for it in the first place. Everyone has pointed it out already, but I want to reiterate the overwhelming majority of material available for download on Live is incredibly overpriced.
Movies are more expensive and problematic on Live. A cable operator, dish provider, or even a Netflix provide far greater value on all fronts. The original games can be found on physical media for much less then Microsoft wants to charge. The rest just isn't all that intensive. Remove original titles and the television shows, and you have no real space concerns at all.
I cannot argue strongly enough against sitting on the fence however. That is a very flawed logic. You can't win if your not it. All you accomplish for yourself is that you keep falling farther and farther behind. The reality is that every console is at least going to see three more revisions before this generation is over. You follow the logic to inexorable conclusion and you should never buy a current generation console. You should wait till a generation is over, and probably kill off your community experience. Thankfully you can upgrade your 360 and if you have to have the absolute perfection then you could buy the latest model after the generation is over. Like a PS2 that is just over a hundred dollars now.
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