With all the great new offerings out or coming soon for the 360: XBox Live Video Marketplace, XNA game creation, and the recently announced IPTV, the poor little 20GB hard drive's days look numbered.
Is MS planning to release a larger hard drive for the 360 I'm pretty sure that many people (including myself) would be very interested in one.

XBox 360 hard drive question for MS staff - semi off topic
darkwarrior0404
HSBF Lewe
I suppose they could go DVI-with-HDCP which is very similar (minus the digital audio transport). However, I can't see a component-only next-generation media terminal. Not even Microsoft is going to muscle the movie people away from HDCP, and on analog (non-HDCP) cables, you won't get the HD signal.
Umberto
billb59
That's fine if you're in the market for a new XBox. I've already got one and don't plan on buying another one. ;)
oipreS
Is that fact or rumor I had heard there are rumors about the "Zephyr" XBOX 360 with HDMI, 120GB hard drive, and a smaller/cooler processor, but MS said that was just one of their many experiments. I think it would be a great idea personally, especially with everyone moving to HDTV lately, all the enhancements make perfect sense.
kfsoft
It doesn't look like the new chips will be publicised when they start going into boxes as they don't actually affect the machine as such. Simply a result of natural processor development and cutting die sizes is something that intel have done since forever.
So in conclusion. I would expect a public announcement on the larger hard drive (probably to go along with the new TV service) and expect NOT to hear anything about the new die size processor being slowly phased in.
Canalside Studios
I may be wrong, but MS could probably cannibalize the majority of parts from the current 360. It would be cool if they roll out the Zephyr (XBOX v2.0) with the option to send in your current 360 plus a cost recovery fee (labor + parts) to upgrade. The people that don't care about the extra features will be happy with their current XBOX, but someone using it for games, videos, tv, and XNA would probably jump all over the upgrade option. Having an "ultra" XBOX 360 (in addition to the core and premium models) will also improve on the competition side against the PS3's feature set.
But I agree on the flash and USB hard drive storage...I'm surprised they haven't added that functionality yet. Or at the very least, storage on the Zune. Is there a fear of piracy
Glenn Burnside
Nially
John McMillion
What I would most like to see in terms of additional storage is the ability to use a standard USB external hard drive. Similiar to DVR's. For instance, my Explorer 8300 DVR, made by Scientific Atlanta, does this very nicely. And it formats the drive in a way my PC does not understand, which reduces the risk of ripping content from it. I connected a 250GB unit for around $100.
It would be a shame for Microsoft to only offer the use of a limited capacity drive, made or re-branded by them, at a price well above that of the external storage marketplace.
Tvercel
The Xbox 360 was made upgradeable specifically for peripherals and accessories of that nature. It'd be just silly to assume that there is no larger hard drive headed our way. =)
IlCapo
roni102
As for a propper larger harddrive all the 360 drive is is a 2.5" laptop drive and there are already mod sites that have swapped them for larger units. The only thing that concerns me is would xbox live block you for having a non standard hard drive.
Also if anybody saw the frank savage XNA video on channel 9 his screen shows a 60GB drive and although it doesn't show the 360 he does say in the video that it's just retail kit and not a dev kit.
bes7252
HD DVD... => and a version of driver have been made for using it one a PC.
so we need to wait...