All good questions SM.....
Unfortunately, I don't have any answers for you though. I have 3 XBoxes, two of them have 120 GB and one has a 500 GB. When I made my first one a little over a year ago I played around with the standard hard drive for about a week before I learned how to upgrade and I took a drive I had laying around never looked back.
You might be able to hunt those answers down or find somebody who knows, but I really think your time would be better spent just doing an upgrade. It's so worth it to be able to have every game I'd ever want to play on the Box and never once have I had to mess around with network sharing or burning disks. (I do use network sharing for TV shows and movies though because XBMC makes that so easy and transfering TV shows and movies to the XBox and deleting them when I'm done is just silly)
It's cheap and easy to do. Check out the hard drives at newegg.com. Shipping oftentimes is free and you'll usually have your drive in 3 days max. JUST MAKE SURE YOU BACK UP YOUR EEPROM AND YOU"LL ALWAYS BE ABLE TO FIX ANYTHING YOU MESS UP!!!!!
If you go this route and need some advice, just let me know. I haven't been around as much now that I'm enjoying the nice weather but I'm still active.
Actually, I've still done some more work on the project since my last post. It's not dead either, but I can't devote all my free time to it anymore. It was getting crazy there how much time I was putting into it and letting everything else just slide. I haven't tested more than 1/3rd of the games yet now that a majority of the code changes have gone in, but I'm actually quite suprised at how many 2 player alternating games I've fixed with the code changes and tinkering I've done. I'm guessing in the end it will be somewhere around 300 2 player alternating games that I've fixed. There are, admitedly, a few bugs that effect other games (I think 3 games so far), but now that I'm really starting to get the logic to the MAME code, I think I know how to fix them too. Also, the other day I managed to figure out how to individually re-map games on drivers with many games on them like NeoGeo, which before I thought couldn't be done. The problem was that if you remapped one of them, all of them were remapped. This was usually fine for fighting games across a driver because if you swithed it so A was jump on one then A was jump 95% of the time or more on all of them, but if there were any overhead shooters, it would do things like change your main weapon to X button and the secondary to A button which just didn't work for me. So that's good news too... I will be able to perfectly map every single game (minus trackball & gun game).
Keep an eye out for this thread in the future for updates. I'm just not going to be as active as I was.