Wasn't there a huge controversy about needing an actual Xbox 360 hard drive to play Halo: Reach's online co-op? Apparently a flash drive or the 4 GB internal flash that comes with the Slim won't suffice for online co-op.
If you are getting an Xbox 360 to play online co-op, don't get the 4 GB Slim because you won't be able to play online co-op. Wait it out, save up the extra $100 plus tax and get the 250 GB model.
I'm one of those gamers that bought the Xbox 360 Arcade first and then bought the hard drive after. Luckily for me, the $110 60 GB Xbox Live Starter Pack (60 GB hard drive headset 3 months xbl gold ethernet cable. HD AV cables not included but I use HDMI so I didn't need them) was actually kinda reasonably priced at the time considering that the 60 GB Pro at the time was going for $100 more than the Arcade then. But nowadays if you were to buy the hard drive seperately, it's a total rip-off. 250 GB hard drive = $150. So in the end you'd end up paying $50 more. To gamers who don't live with the rents and don't have that much income, $300 is a lot of dough to spend in one shot so it's good that Microsoft offers a $200 sku. But online co-op is such a vital experience for the Xbox 360's core audience. And the Xbox 360 is so infamous for scratching discs (though the newer models might have fixed this issue) that going without HD installs doesn't seem worth it.
Ideally MS should let you use third-party hard drives in your Xbox 360 like the PS3 does. But I'd imagine that profit margins on the $200 Xbox are thin (compared to the $300 Xbox 360 and PS3. The $300 PS3 Slim is profitable for Sony and considering that the Xbox 360 doesn't have Blu-Ray, M$ must be making a good penny with their $300 250 GB 360). So I don't blame Microsoft for their tactics. They need to cover costs. And if everyone bought the $200 Xbox and installed their own hard drives, Microsoft probably wouldn't be making shit profit-wise. Microsoft isn't a charity. They're in the console gaming business to make money.