This is a follow-up to yesterday's post about a possible "Slim" Xbox 360. More evidence has turned up. Joystiq has uncovered information revealing that a Spring update to the Xbox 360 firmware will allow external USB devices to work on the 360. But there are a couple of limitations. First, the 360 will only address 16 GB of space on an external storage unit, and it will only acknowledge 2 units. So in theory you could plug in two 16 GB USB devices and add 32 GB of storage space to your Xbox 360. But what you can't do is add an external 120 GB drive in lieu of buying an official (and over-priced) Microsoft replacement hard drive.
So what does this have to do with the rumored Xbox 360 Slim? These limitations make it pretty clear that Microsoft is giving up the Memory Unit business. No one is going to spend $40 for a 512 MB Microsoft Memory Unit when they could spend $35 for a 16 GB thumb drive that does the same thing. Remember, this is the same Microsoft that made a point of locking out unauthorized storage devices last fall. They weren't interested in sharing the Memory Unit market then; one can only assume that they're just going kill it off altogether now. Why would they cut themselves off from this source of revenue? Because the Xbox 360 Slim won't have ports for a Memory Unit. Instead it'll just have USB ports, saving either enough room or enough expense (or both) to offset the lost revenue from Memory Unit sales. It'll be interesting to see if they finally phase out the "Arcade" model (the one with no hard drive) model when they introduce the Slim. I would think that would depend on how much storage space (if any) Project Natal requires. Because that's the other possiblity: that Project Natal requires significant storage space (possibly temporary, cache storage), and Microsoft wants to be sure Arcade owners can use Natal, and further, that they don't want to introduce an even larger Memory Unit to facilitate that. Instead, Microsoft could advise Arcade owners to purchase a USB thumb drive (or even see a Microsoft-branded thumb drive). This scenario seems more contrived, though. So I'm sticking with the idea of an Xbox 360 Slim with no memory card slots. [UPDATE: Video game modder extraordinare spoke to Joystiq about the leaked motherboard images and offers his opinion that the board shown would not support Memory Units. He's got some other interesting things to say and the post is well worth a read.]