Documentation obtained by Joystiq - and subsequently confirmed with two separate sources - reveals that "USB Mass Storage Device Support on Xbox 360" will soon be a reality. The document, authored by a senior software development engineer at Microsoft, states that due to "increased market penetration of high-capacity, high throughput USB mass storage devices, a 2010 Xbox 360 system update" will allow consumers to save and load game data from USB devices. The update is purportedly coming in Spring 2010.
Once the update occurs, Xbox 360 owners will be able to download Xbox Live Arcade games, Xbox Live Indie games, Games on Demand, DLC and Title Updates to the storage device. "USB storage devices may, however, have far greater memory capacity than MUs (at the date of writing, the largest MU is 512 MB), and may therefore support previously infeasible operations-such as installation of a full disc-based title." That's right, you can also store disc-based games to the USB device; however, it will require the disc to be in the tray for authentication, identical to the current functionality.
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.
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