What are the differences between the 4GB and the 250 GB versions of the Xbox 360?

Enticed by the Kinect, this will be the family's first step into a dedicated console so we aren't hardcore gamers. My current understanding is the 250 GB of the Xbox 360 version is for quicker switching/loading between different games (which isn't a priority).

Are there other considerations beyond gameplay? Differences related to integrating other media or Windows 7 peers from the home network?

The 250 GB version has an internal harddrive. Is it worthwhile to the non-hardcore gamer?

I own a 250GB Xbox 360. It gives me the following advantages over a 4GB version.

1. I'm able to buy games from the "Games on-demand" store
   These games are like any other game, but paid with my VISA card and downloaded from the Xbox LIVE service. I do not need to insert a specific game disc to use them, they are available from the "Games library" menu.
   There is barely place to store a single Xbox 360 game on 4GB
2. I'm able to download music videos, movies? and other rich content from Xbox LIVE.
   You would only have place for a very limited amount of rich content on 4GB, my phone has more memory
3. I'm able to store games from game discs on my HDD.
   Some games are designed to run better, or natively do, when "installed" on the HDD. Halo: Reach is an example of such a game.
   The game disc needs to be inserted and working when playing "installed" games.
   Space will NOT be sufficient, again.

Trivia: An Xbox 360 game tends to be around 6GB.

Also is it worth noting that 4GB doesn't consider that storage as Harddrive but as an additional USB storage.

There could be a problem with games that really need the HDD (I remember Halo 3 replay functionality was such that it refused to work with 4GB internal storage).

I recently purchased the 4GB Xbox along with Forza Motorsport 4. The Xbox is great, but as others have said, 4GB is very limiting, especially when the OS takes a few hundred MB.

Forza 4 comes with additional content on a 2nd disc which must be installed to use. There's about 4 different collections of cars on there, but I found with the 4GB drive I could only fit 1, maybe 2 collections on the 4GB drive.

You can plug in an external drive (FAT32 format), but it only uses the first 16GB. I did read somewhere that it'll use all of a HFS+ formatted drive, but that didn't seem to work for me (it may have only been the original white Xboxs?).

In the end I went out and picked up one of the 320GB "Xbox 360 Media Drives" on special. It's basically a HDD with a special connector. The side panel of the Xbox comes off & reveals a slot for it.

I'd check the pricing on the bundles & accessories though - I got the 4GB Xbox (just the unit) for ~AUD$200 & the 320GB drive for AUD$120 (included Lego Star Wars III download). Most of the stores here are selling the 250GB model (just the unit) for ~AUD$350.

If you need DLC, sooner or later you will need more than 4GB of space.

If you use loads of games that need updates, you will possibly fill up that 4GB quickly. Some games like Burnout Paradise have huge updates, others use only a few MB.

If you plan to store music or movies on the 360, you would be better to get the 250GB version.

If you only plan to use the HDD for save files, 4GB is probably fine.