As we mentioned earlier a dashboard update is coming out today that will allow you to use usb drives of 1-16GB in size as memory units. We also pointed out our misgivings about the whole ordeal.
So the good news is you can use a non-MS branded drive. The problem according to the message boards is a lot of brands seem to get error messages when trying to format for use by the XBOX 360. The official XBOX branded drive is made by Sandisk so their other drives will most likely work. All others seem to be a crap shoot right now. And there is no compatibility list yet. You just have to try it out.
In order to not overload the servers MS is slowly sending out the update so if you don’t get the upgrade message when you sign in just wait a few hours, it will show up eventually.
