[quote name='tangytangerine']If you're going to download some games from XBL, I suggest getting a hard drive. More than half that 512MB built-in memory will be taken up by XBL updates. I've done the 4 updates since August and they have taken up 268MB of that memory.[/QUOTE]
On that note , if you don't really care about Rock Band songs or any games with a ton of downloadable content , you could probably get by with just a 20g drive , which only cost about $20-30. If you want to be safe , 60g drives cost around $90 , but you do get a 3 month live card and extra headset.
As far as the Arcade disk you could always pick one up from GS , which most locations are flooded with , for like >$10.