The decision to sell the HDD as a stand-alone comes as quite a surprise. Microsoft has said in the past that it would be keeping the 250GB HDD exclusive to bundles, like the ones offered for MW2 and Splinter Cell. Though it's expensive, it's good news for those who are desperate for a storage upgrade and willing to pay through the nose for it.
Just as an FYI, it seems the 120GB HDD may not be around for much longer. Joystiq cites Microsoft as saying the drive is available for $99.99 "while supplies last."