Can you use a external usb hard drive as your primary hard drive for saving you game progress and such? Or must you use a Microsoft Xbox 360 hard drive to save?
your save games, profiles, downloadable content, etc has to be stored on the Xbox 360 drive. However, you can use an external drive for songs, movies, and other media.
I'm going to get an external drive soon but in the meantime I use a 2GB flash drive for all the music I want to listen to while I play Tony Hawk or racing games. Because of stupid DRM you can't rip the music off of an MP3 player or flash drive, only stream it.
DRM is stupid. About 2 years ago I signed up for (I think) yahoo music or maybe it was napster I don't know. The point is that of course all the music you download to your computer had DRM on it so if your subscription runs out the licence expires and bye bye music. However, I just used a program called Tune Byte that will record the audio as it passes through your sound card and saves it as an unprotected MP3 file with no reduction in sound quality. No more DRM. What I'm trying to say is that DRM is pointless when you can get around it so easily. End of rant.
If you don't want to buy the 120GB version (which is pretty expensive), you can buy a 2.5" HDD (it needs to be a 1200BEVS) on ebay for about $50, and can just flash it with a tool so that it will work with your 360! I did that and it works really well!