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It is possible to have an Xbox 360 slim external hard drive however there is a catch. The maximum capacity for external storage is 32 gigabytes which includes both flash drives and hard drives. Even though the xbox 360 slim has five usb ports only two will recognize external storage devices and only up to 16GB per usb slot. The drives have to be formated with fat32 and must have at minimum of 1gb of storage capacity. 512mb off of every xbox 360 slim external hard drive and storage device are reserved for system use.
The maximum storage capacity for an xbox 360 slim is 356 GB minus system storage and formating space loss. The way to achieve this would be to buy an xbox 360 slim with 4gb of internal non removable memory, buy an xbox 360 slim 320GB hard drive, and then also use two usb external storage devices each with 16gb of storage capacity.
So as you can see it is possible to have an xbox 360 slim external hard drive or usb thumb drive but there are limits to the size. Why microsoft built the xbox 360 slim this way no one knows. If you want to avoid formating the usb drive yourself you can purchase a preformatted 8gb or 16gb usb thumb drive
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