Yeah, it's that way for all Game Room content. The Game Packs are free, the games themselves cost you (be it in tokens or a flat fee for unlimited play). I think he was just stating the obvious for the ppl out there who may not have touched Game Room before.
(I'm a Game Room addict. Have...
You can use it, but you'll only be able to use 16 GB out of that 250 for :360: purposes. You'd be better off just going out and dropping $40 a cheap 16-gig USB stick that you can leave jacked into the box 24/7.