This spring Microsoft will be releasing as system wide update for the Xbox360 that will reportedly allow the use of USB drives in the same fashion as the proprietary hard drives that have been in use since the release of the console. It appears games will also be able to be installed to the drive just the current hard drives. However, apparently drives must be at least 1GB in size and the software will only support up to 16GB of usable non system memory.[Joystiq] Theories that this new update in connected to the rumors of a slim form factor 360 are running amok, yet at thispoint we know for sure the update is real. As for the Valhalla motherboard and small form factor, well you’ll have to ask Odin.
USB Mass Storage Support for 360
