Eurogamer got Microsoft on record to confirm that the Xbox 360 Arcade will begin shipping with 512-megabytes of built-in storage. Here's what Microsoft told them:
"The Xbox 360 system software uses some of the included 512MB memory; less storage will be available to users. Additional storage (sold separately) may be needed for game saves, Xbox LIVE Arcade games, content downloads, personal file storage, and additional enhanced functionality. A hard drive is recommended for LIVE, and is required for some features," the company said in a statement. "We want to offer consumers a bit more memory at the same low price so they can enjoy more experiences on Xbox LIVE."