Specifically, I want to buy a 360 but I also want to be able to download games from the marketplace. The cheapest console is 4gb, which won't be enough to hold even one premium game, so I'm curious if it's a better idea to spend the extra $100 to get the 250gb console or if it is cheaper to replace my hdd with a bigger one when I need to.
Cost is not the only factor (a major one though). Are there other disadvantages to replacing the hard drive (such as loss of warranty? the reason I'm buying a new console is for the warranty, after all).
Also, a valid answer could explain how I could use an external hard drive that I already own to store and play games purchased from the xbox live marketplace.