You can use up to Two external storage devices with a max 16GB per device at a time. You can use Flash Drives, however higher performance drives are required (If you have a USB 3.0 stick, chances are it runs max
USB 2.0 speeds when plugged into a USB 2.0 port, you should try that). As for using an external HDD, you will have to format it to the FAT file system unfortunately (Windows XP/Vista/7 use the NTFS system, you can still use the HDD with your computers, it's
just that the NTFS system is better). When it comes to HDD performance, I don't understand the requirements. The Xbox 360 HDD is 5400rpm, I used an external 5400rpm drive and it told me the device may have performance issues, it might be the bottlenecking
of the USB 2.0 connection.