Well, now I wanna cut it open just out of curiosity.
I'll let you know if I get a spare $90. 
As for external hard drives, they come available up to a terabyte in size. Dunno if that'd really be necessary, but having an external hard drive to stream from certainly seems like a good idea. I wouldn't have to worry about taking up space on either my PC or the 360 with all of my music, anymore.
That may be the next thing I buy...
I think it would be cheaper and easier to just add a standard HD to your PC and upgrade to Media Center XP. Vista should have the same ability to stream video as Media Center XP as well. It's very easy to network the Xbox 360 and the PC, even without a router. I found an old network card and added it to my PC (so it had two). One was internet in, one was xbox out. Very easy to setup in XP as well.
That allows me to stream pictures and music to my 360 (even during games). Doesn't let me stream movies, though (since I don't have media center xp). I actually plan on checking to see if Vista is currently working like Media Center XP. If so, I'll snag the beta so I can stream movies.
While both options (streaming & removable hard drive) will get a simular result, permanent bonus to hd space on my PC isn't a bad thing.

Though, if you don't care about a PC upgrade and don't mind spending a few extra bucks on a USB HDD, then that route is certainly most acceptable too. I guess I'm just being lazy not wanting to move it back and forth to put things on it from my PC.
I am glad to see that we have options though. Getting content on the Xbox 360 was a bit troublesome without streaming from your PC and without the right software, it was impossible to get movies to the darn thing.
I think we need to find out though if we can stream video via a USB HDD or not though. That question was never answered for sure. If you can't, then I'd defenitely have to go the stream from PC route. If you can, its a very viable alternative.