With the new NXE dashboard update the Xbox 360 now also supports USB flash drives to save movies, savegames and more. You can use devices with up to 16GB but you have to spend around 512MB of each drive for configuration data. The USB drive itself should offer a good performance to allow flawless gaming. If you plan to get a flash drive specifically for the Xbox 360 you can use this online overview with performance informations for most USB drives. It offers good filter options to find the right one for you.
