Wow! You guys are being so negative about this. Why would you need more than an extra 16GB or 32GB just to save or back up your gamer tag, downloadable content, saved-game data, possibly a few downloaded movies, and the occasional game demo. These are really the only things going on the xBox storage devices.
For everything else, just plug any size external HDD into a USB port on the xBox 360 and that's it. For those of you here who think that the xBox 360 does not support FAT32 you are wrong. Get any size external HDD and format it with FAT32 and there you go. Keep all of your movies, tv shows, pictures, and music on it and don't worry about it.
Some of you may even be thinking that the partition size limit of FAT32 is 32GB or something like that. That's just a limit Microsoft placed on their NT based OS's (WinNT, Win2k, WinXP, WinVista, Win7) to try and get you to move to NTFS, but Windows 98/ME could create and format a 120GB FAT32 partition (which is still just another limit based on lack of hardware support and testing abilities at the time of Win98/ME's release). All of these limits can be easily overcome with the download of one simple command line tool, easily found with a quick google search, that you can use to format larger size partitions with FAT32. The actual maximum size limit for a FAT32 partition with a sector size of 32KB is about 2TB. Yes that's terabytes. So to sum up, just about any external USB storage solution you buy for your xBox 360 will work in its entirety, if fromatted in FAT32, for everything except storing actual xBox 360 data. For that Microsoft will now allow you to use up to two simultaneous 16GB flash drives to do the trick.
Oh, and they never said you can't use 10, 20, or even 30 16GB flash drives (if you so desire). It's just that you can only have 2 plugged in at the same time.