After learning that the New Xbox Experience and Avatar customization would require, at minimum, a 256MB memory card, it spawned more questions than answers. Would the NXE install take up all 256MB? If so, what about Xbox 360 Arcade owners and their tiny 256MB memory card? Wait, what about Core customers who don't have storage or own a 64MB memory card? What are they to do and is the NXE update a mandatory download? CONFUSION! So, we reached out to. Major Nelson and, thankfully, he cleared up said confusion ...
"The new Xbox experience will require 128MB of free space. A hard drive is recommended for the optimal experience, to take advantage of some new features, and to be able to enjoy the great movies, TV shows and games available on Xbox LIVE. While we expect the majority of consumers to download the New Xbox Experience without a problem, a small percentage of Xbox 360 owners do not have enough memory to accommodate the update. To help ensure all Xbox LIVE members are able to download the New Xbox Experience and enjoy its new features, Microsoft will be offering storage solutions to the Xbox LIVE community. We are not sharing details of this offering yet. Be sure to check xbox.com for more details in the coming weeks."
There you have it. The NXE is a required dash update, will need roughly 128MBs of storage, a HDD is recommended AND (shocker here) for those who own little or no 360 storage, Microsoft will be offering some sort of "storage solution". We wait for more info ...