If possible obviously I'd rather put the £45 difference toward kinekt or something. 4GB is tiny and pathetic so I would prefer 250GB unless I can do some of the following from an external drive using X360 Key:
1) Play Game Demos. Usually deleted right after playing. Ranges in size about 700MB-2GB.
2) Use / Download Game add-ons. These include extra maps for multiplayer games, additional campaign levels or missions, new songs for a music game or new in-game characters. These could range from a few megabytes to a couple of gigabytes depending upon the amount of content you are buying. Extra multiplayer levels or missions could use a lot of space.
3) Play Xbox Live Arcade Games or Indie Games. These range from usually really small 40MB to the occasional big game 300MB. None of these games require a HDD, but they could add up over time. You will be fine with a USB thumb drive for these games though. And you can always delete and redownload later if you need to clear space.
4) Install disc based retail games to the HDD. This was much more useful with the old Xbox 360 because the DVD drive was so loud when it would spin. The new Xbox 360 is so quiet that there is very little advantage to installing games. Load times are only reduced by a few seconds by installing games to the HDD.
5) Play Game videos. I expect this will eventually change, but for some reason unlike movies, movie trailers, tv shows, and music videos Microsoft still requires you to download game trailers to your hard drive. Microsoft clearly has the ability to stream 1080p video so there is no reason for this any longer. For now though you need storage space to watch game trailers
Will it do this?