The latest update for Xbox 360 is now available over Xbox live, which means that you can now start using old USB memory sticks instead of memory cards - you can even install games for them. As noted before, they can't be smaller than 1 gigabyte and not larger than 16, so keep that big external drive connected to your computer. Sorry!
There will be official USB sticks with the fancy 360-brand on them available as well, in case you don't use Live or just fancy an official one.
