The Xbox 360 Arcade is unquestionably the cheapest way to access brilliant next-gen gaming. There’s a small problem, though - the unit has no hard drive and offers just 512MB of on-board memory. That’s not going to stretch very far when the funky New Xbox Experience (NXE) dashboard update launches - is it?

Most likely not, since the NXE is set to occupy 128MB of the paltry 512MB built in, and the remaining memory will no doubt be needed to accommodate save game data, LIVE Arcade titles and other media. Where’s it all going to fit when NXE launches? Well, Microsoft has plainly been pondering the very same question and, as Xbox LIVE’s chief blogmeister Major Nelson reveals, has concocted some kind of solution:

"While we expect the majority of consumers to download the New Xbox Experience without a problem, a small percentage of Xbox 360 owners do not have enough memory to accommodate the update. To help ensure all Xbox LIVE members are able to download the New Xbox Experience and enjoy its new features, Microsoft will be offering storage solutions to the Xbox LIVE community. We are not sharing details of this offering yet."

And that’s all there is to say on the matter for the time being, but our interest is well and truly piqued. So what's in store? Free hard drives for the memory deficient? MS hosting NXE on your behalf? Come on Major, more details please…!