Internal Microsoft documents obtained by Joystiq indicate that its Xbox 360 console will gain support for USB storage devices
some time this Spring.
"According to the document, the USB mass storage device must be at least 1GB and the system will do a compatibility check. 'The system partition occupies 512 MB of space, and by default the consumer partition occupies the remainder of the device capacity, or 16 GB, whichever is smaller.' Upon inserting a blank USB storage device, 'consumers are offered two choices: "Configure now" or "Customize."' The 'Configure now' option will use 'the entire device capacity, up to the maximum of 512 MB plus 16 GB,' meaning, regardless of the overall size of the device you're using, the Xbox will only enable 16 GB of usable, non-system storage. The 'Customize' option will allow you to 'preserve some pre-existing, non-console data on the device' such as music."
There have also been rumors of a new, smaller form factor
for the 360, and hacker Ben Heck has given his thoughts
on some leaked motherboard pictures.