Please, this is Gabe Newell we're talking about here. The guy's company can make some great games, but he seems to have a habit of blaming others for his own shortcomingings. For example, postponing Half-Life 2 an entire
year because some of the source code was leaked...

More like, they knew they were months behind and blamed that fact on the leak.
Besides, MS is allowing Square to release FFXI, which will require a hard drive. They'd do the same for Valve, I'm sure. Plus, it's not like the PS2, where you had to take the system apart to add a hard drive (if I'm understanding the 360 Core system correctly). Console manufacturers have been selling upgrades to their systems for years, many of which are required by certain games. The HD should be no different here, just more expensive than most other expansions. But in return, you get more for your money.