Microsoft's Major Nelson did say you can use any 1GB+ flash drive you like, but he also said Microsoft would partnering with SanDisk to bring out official, pre-configured Xbox-branded flash drives that would be available in May.
Well GameStop has one of these extra special, Xbox 360-brand flash drives listed on its website and it should come as no surprise that they're a little overpriced. Though they do come with a month free Xbox Live Gold membership, it's still hard to see many people paying $40 for an 8GB flash drive. If you want to use the maximum allowed space per drive, you'll have to pay $70 for the 16GB option.