Just out of curiosity, have you tried it with an X2 bios instead of M8? I do about 10 xbox mods a week, and the first week I tried using a hacked M8 on anything other than a 1.6 I would have strange problems. Yes, I was using the Non 1.6 bios on the non 1.6's, they did boot, but would lockup on bootup quite a bit, or in games, just lots of random problems. I never tried a drive over 250G with it though so I dont know if there are problems with that as well. I am using some flavor of X2, prolly not the newest, but it has worked fine for me for a year with my 320Gig w/ F&G.
So for me, someone who pushes out alot of Xbox's, and dont want them back with problems, I go with X2 bios' on everything but 1.6's, and M8 on the 1.6's and so far I have not seen any problems. But like I said, when putting M8 on an X2.6 it really makes things unstable. I think X said something about you may have to flash it to bank 2 to get it to work, but I just chose to stick with a bios that I know worked for my 1.3.
EDIT: And for anyone who cares, I picked up my Seagate 400GB HD on sale at CompUSA today/tomorrow for $239.99 then there is a $30 rebate on top of that, so $210 for a 400GB HD with a 5 year warranty is a good deal if anyone cares.