250GB drive is simply going to be a more cost effective choice for MS. So they can either silently do it or go ahead and advertise it as a new benefit.

If you look at the red sentence, it is the "starting salvo" of their response. To continue the metaphor, they fire out this bundle (and others apparently) and then drop a bomb holiday season by repackaging a new elite with these specs during the holiday season. That may be their response, and effectively beating the rumored 250gb slim to market. Aside from a redesign of the console (or building frickin' wireless into it, come on MS!) there isn't much else they can do to respond.

How are current users supposed to transfer data from their 120gig or lower hard drives to these?

Very shortly if not already there will be only one reason for MS to sell a 120GB drive over a 250GB drive.  That one reason will be that they have an inventory to clear. Once that is done since 250GB drives now would cost about the same amount as a 120GB to purchase it makes no sense to purchase any more 120GB drives. 

I also still believe MS has to have something planned with the Arcade for the Holidays.  The 360 price really wasnt reduced.  The $300 pro was dominating the $400 elite in sales already. MS just added 60GB to the pro with the new elite price and that wasnt really a price reduction.

250 gig is nice,too bad its only part of the limited edition,Red 360 FTW!!!!!!!

With this?

http://www.xbox.com/en-US/support/systemuse/xbox360/console/datamigration.htm

Regular Elite 120GB = $299
Extra 120GB HDD = $40
Extra controller = $49
MW2 = $60
-------
total = $449

it's selling pretty well on Amazon, #10 right now

Do they have any plans on selling the 250GB HDD separately???? If it was reasonable I would get it.

Becuase the Ps3 fans this gen believe that beating MS is all that's on their plate...While the Wii pummels it in every terretory...so they fight against the 360 becuase the RRoD gives them hope....

When Infinity Ward's anticipated shooter Call of Duty: Modern Warfare 2 is released November 10, it will go on sale alongside its own co-branded Xbox 360.

During an Activision press event promoting the game, Microsoft announced a $400 bundle that will include a black Modern Warfare 2-themed console, a 250GB hard drive, two wireless controllers, and a copy of the game itself.

Immediately following the announcement, Gamasutra spoke with Xbox senior marketing director Albert Penello about how the deal got made and how Microsoft views Infinity Ward's latest title among the spectrum of Xbox 360 games.

"We actually get asked a lot to do this kind of stuff," Penello said of co-marketing deals. "This was a time when we had the idea and they had the idea."

He added: "We approached them six to eight months ago with various thoughts about what we were going to do to market the game. It was a mutual meeting of the minds."

Asked whether Microsoft and Sony attempt to be the first to the punch with initiatives like pack-in bundles for big holiday titles, the marketer said that publishers and manufacturers need to start collaborating far too early for that to practically be the case.

"We have to plan this stuff so far in advance," he said. "But by the time it's done, it ends up appearing that there's some similar thinking. We've been working with Call of Duty, and we knew it was going to be one of the biggest games of the year. We've done this with Halo in the past, so every once in a while when there's a great game, we try to do something cool."

And Penello believes the Xbox 360 team-up is particularly appropriate in this case: "Every generation has games that get associated with [certain] consoles," he added. "Because of how strong the multiplayer is, and since we're going to have downloadable content first, it's a game that I think is associated with Xbox."