are we allowed to use any external hd with xbox?

You should be able to store game data on a normal USB stick drive. The Xbox will format the USB though, which is easily deletable if you decide to no longer use the USB.

i ment hardrive not usb stick.

As per this article, I do believe that it must be "Flash" memory.

www.xbox.com/.../Storage

Hope that helps.

Yes, you can use any USB hard drive with the 360. However the 360 will only read 16GB of that hard drive as that is the capacity limit. So if you go out and buy a 1TB hard drive all of that extra space would be wasted. Your best bet would be to just use USB Flash Drives (up to 16GB).

Or the 250 gig xbox hd or the upcoming 320 gig that been rumored basically a USB hd would be a waste of space it doesn't perform as well as a USB or a internal xbox hd

Yes you can. As long as it uses USB, it will work. All you will need to do is let your Xbox download the firmware onto the device.

I just did a test on this for myself about 5 minutes ago.

I plugged a 120GB USB hard drive into my Reach 360S, went to the system configuration, & then into memory.  It showed an available "USB Storage Device" in addition to the internal 250GB HDD.  Selecting that option asked if I would like to reconfigure the device for XBOX 360 storage.  This would wipe out the drive & setup the 16GB data area on it, which is the limit for external storage devices currently.

Which really sucks, because I'm down to 6.8 gigs free on my 250GB drive *after* moving Arcade downloads, videos, & some on-demand 360 games to USB flash drives.  I've already filled up two 16GB flash sticks, in addition to the internal  HDD, because I try to get the digital versions of games so that I don't need the discs.

[quote user="ANGRYMOBJUSTICE"]Yes you can. As long as it uses USB, it will work. All you will need to do is let your Xbox download the firmware onto the device.[/quote]What are you talking about?

USB storage devices are limited to 16GB in size. There is no "firmware" involved. The 360 will, by default, repartition and format a USB storage device so it is a single FAT32 volume, then place the USB Memory Unit directory/files onto the new FAT32 partition. These files will either take up 16GB (plus a bit of reserve space), or the entire capacity of the device, whichever is smaller.

USB Memory Units are not treated the same was as a 360 HDD. No original XBOX game backwards compatibility and no support for games or DLC that require a HDD (Halo: Reach co-op) are the two big differences.

The best solution for large amounts of trusted, writable storage on the 360 continues to be the HDD. USB Memory Units are not that useful for game or large DLC installs.