Yes it is true; Microsoft's "New Xbox Experience" requires more memory to install than is available with previous "Arcade" units. If you do not have enough storage, you cannot get the update thus eliminating your ability to use Xbox Live at all. Microsoft basically has to do this, otherwise they won't be keeping up on their end of the deal when it comes to supporting ALL of the consoles they sell. I'd suggest jumping on a 20GB hard drive while you can, otherwise you may end up missing the opportunity. Another issue though, the hard drives are apparently refurbished, and I don't know what kind of warranty Microsoft will give you.