Not sure if you guys heard, but in possible anticipation of a "slim" Xbox 360 lacking the proprietary memory card slots, Microsoft is adding USB Mass Storage support to the 360 the Tuesday after next. After that point, you'll be able to put a flash drive in, and have it format up to 16GB for storage of save games and even full games (though for those, you still need the disc in the drive, they're not going to let you rent, copy, return, and play). This is an amazing opportunity because now I'll be able to carry all my Rock Band songs with me, as well as downloadable expansions for games that I've bought. All this is playable as long as I'm signed in, and it's trivial to move a profile from the core unit to a memory card -- in fact, my profile lives on a proprietary Xbox memory card now. So I can sign in from any Xbox and re-download my content. With a flash drive, up to 16GB, I don't have to re-download it, just copy it over.
(Once I convince my wife to let me buy another 16GB flash drive, that is. Maybe this time I'll just get a portable hard drive. If your drive is greater than 16GB, Microsoft says the remainder will be available for use on PC/Mac.)
What I'm wondering, and asking on behalf of people on gaming sites that think all flash drives are the same and have never heard of Corsair, OCZ, or Patriot, is... the Xbox 360 creates a 512MB file that it says is "reserved for system use". We know the 360 reserves 4GB of each hard drive (whether 20GB, 60GB, 120GB, or 250GB) for "system use" (but only 13MB of the proprietary 512MB "Memory unit" -- they ship 499MB free). Now, if a gamer puts his installed game (say, Modern Warfare 2) on some lousy SanDisk or PNY drive they bought at Walmart, and the thing gets horrible read/write speeds, how could this 512MB "reserved for system use" file possibly help -- if at all? I don't think it can be used as a cache -- isn't all data on a flash drive read at the same speed?