Nope, MS made everything proprietary so you have to buy their stuff. You can get a used 120gb hdd off amazon for $70ish. Don't waste your money buying a new one... the only problem is that most are black ones from Elites so it'll clash with your white and grey console.
No, you can't use an external HDD or thumb drive. I think Arcade consoles have some flash memory built-in for game saves. I think it's either 256MB or 512MB.x-2tha-z
Newest ones have 512mb, ones from a year ago have 256mb and the oldest arcades came with memory cards and nothing on the mobo.
I got a Jasper Arcade for Christmas (last year duh) that was made in November and it's been a serious beast for me. I've had it on for 10-20 hours sometimes and it still runs pretty cool.
The only way to really fix scratches (disk cleaners are rip offs and dont do anything) is to heat up the plastic of the disk with a lighter until it softens and fills the grooves of the scratches in. The only (huge) problem with this is that you can easily ruin the disk this way. So dont even bother.
If your friends have the games, borrow them and install them to your hard drive (yeah halo 3 runs slower but oh well) then you can still use your disks.
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