It's now possible to install third-party hard drives into the Xbox 360, but there are some caveats. A hacker created a DOS-based program that, for now, only works on Western Digital BEVS hard drives. Also, the 20GB storage limit is still in place. It can only be surpassed if Microsoft officially releases a larger hard drive (so the 360 "knows" to look for a larger hard drive) or someone hacks the system's kernel. Since a larger hard drive has been rumored for a while now, waiting for the official Microsoft patch is likely your best bet.

So what's the point of all this if you can still only use 20GB hard drives, and can only use one series of hard drive? You can save money. Right now, the official 20GB Xbox 360 hard drive costs $100, while for around $60 you can find compatible 40GB hard drives (and for around $100, you can find 100GB hard drives). This is a good start and complements the other Xbox 360 hacks we've seen.

TheSpecialist's HDDHacker v0.5B - Install your Own HDD on Xbox360! [Xbox-Scene]