I've read recently how the Xbox 2 is probably not going to have a hard drive. The reaction has been pretty negative. I think people need to think a little more creatively.
I suspect that Microsoft is going to use some kind of solid state RAM to replace the hard drive. The storage space on these cards is quickly approaching the current Xbox's 8 gig HD size and the price keeps coming down. I'll bet that 16 or 32 gigs of flash storage will be cheaper than the current 8gig HD.
Why would Microsoft go down this road, besides betting that it'll be cheaper? I think they'll also be able to eliminate a lot of the noise that the Xbox produces. The noise of the box comes from the hard drive and the fan used to cool it (and the processor, which will be a PowerPC, which tend to use less power and thus run cooler).
Microsoft also has experience using flash storage as a system's main storage. Where you say? Windows CE/Mobile. (PocketPCs, SmartPhones). Also, how about speed differences? Ever see a PocketPC boot up compared to a PC or Xbox loading from a hard drive? Much, much faster.
Eliminating the hard drive also makes the box smaller, which I think is another goal of MS with Xbox2.
What do you think? Am I restating the obvious?