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There are good reasons not to want to stick a big hard disk in your XBox
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You can add this one too : you could use software exploits and have access to all your backups on the pc and then easily bring back your hd to its retail state to go safely on xbox live.
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Maybe it can't be done, but if so it's not for the reasons offered so far.
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I agree, I think the only problem which could prevent this from working is the size of the loader. It would have to be damn small as it is well-known that halo does not boot with the larger 512k debug bioses. On the other hand, not all games are as memory intensive as Halo and most boot fine with the 512k bios. So I think it's more probable that we would end up with a situation where the most intensive games would have to be to be on the hdd but you could put the rest on the pc. That would still alleviate some load off your hd. So the crucial question is how much memory can the loader occuppy before most games start to crash? I would suggest writing a simple xbe loader and testing this limit before actually plunging into networking protocols.