-Which system to get? I'm prettty much decided on going with an Arcade (probably the newer 6 game holiday bundle) and picking up a $20 Microsoft 20GB Hard Drive. Any reason to go with the 60GB system? I really don't see myself downloading movies and such (since I can do that on my PC or my TiVo already) and game previews/demos aren't too important either.
Arcade should be fine, and with many of the bundles that are coming out you'll have various choices. Though some of the better bundles are those for the 60 GB+. There's even one coming out for Sam's Club that will have Lego Indiana Jones, Kung Fu Panda, and GHIII (w/ guitar) for $350. It's mostly just how much you really want to spend and if you care what is actually bundled. If not perhaps the hard drive and the refurbished $30 HDD from Microsoft will be fine (it also comes with a 3 month Live membership).
-How is the Netflix deal going to work? My wife is a Netflix fan and I've kinda sold her on using Netflix with the Xbox. I've tried to find info on it and mostly I've only seen the E3 announcement and a recent announcement about needing to be an Xbox Live Gold member (whatever that is) to use it.
With the new dashboard coming out November 19th Microsoft has teamed up with Netflix to be able to stream movies from their database. So it should just have your system connected online, and it should have your one queue and everything. I think there are some videos out there. An Xbox Live Gold membership is pretty much what you want to play online. Unlike games on your PC (vice MMOs as you already know) gaming on your Xbox must be paid for. Normally you have your 1 month membership for 7.99, 3 months, one year etc. Of course there are various deals which you can find on these forums. Sometimes paying less than 30 bucks for a year.
This will only be worth it to you if you play online (or if you want to stream netflix it seems). Other perks would only be getting certain things on the Xbox Live Marketplace made available to you first before non-members. Things like demos and such, which you said don't interest you. So you'd be paying extra just for the ability to view Netflix through your 360.
-What accessories am I going to need? Right now my Wii has gotten me spoiled with wireless controllers - it is painful whenever I have to play my PS2 with wired controllers. I understand a wireless controller is included with the Xbox (is that correct?) and I probably won't need a 2nd controller soon since my wife won't likely play the Xbox (she has the Wii anyway). What other useful accessories should I be looking into?
I believe the arcade is wired...but I may be wrong, maybe that was just the core. If you do buy the arcade that will not come with HDMI nor component cables I believe. I think arcade only comes with A/V cables, Pro comes with A/V and Component cables, and the Elite comes with HDMI cable along with the others (also you can connect your 360 wireless with the Elite...or buy it separate, though I think it's like another $100).
So if you have an arcade and you want HDMI, you have to probably pay an extra 7 bucks or so at monoprice.com. That really should be it on accessories.
-Is Gamefly worth it? To be honest, the Xbox game prices are a major reason I haven't purchased a system yet. I own a lot of game systems and a lot of games (I have about 300 games from the Atari 2600 up to the Wii) and I like to own them. But since I'm coming into the Xbox 360 fairly late in its lifespan, there are probably a lot of games I'd like to check out but not purchase. Would Gamefly be worth it to do this, or should I be hitting up Gamestop for used games?
It depends on you then doesn't it. Do you want to own the physical game or just play through them. You can also purchase most of the games you get from Gamefly. So if the game interests you, you keep it. I have Gamefly and I enjoy it, but I know some may not. It's mostly on what you really want in the end.
-What games to initially get? I've played most of the good Xbox/PC crossovers (ie Bioshock, Mass Effect, and soon Fallout 3). And its a long way until Final Fantasy XIII is coming out. What are the "Must have" games for the Xbox 360? Oh, and I don't want GTA4 - just not the kind of game I'm in to (I have GTA3 and hated it so I already know).
Well...the games I was gonna recommend you already played on PC...so lets see. I greatly enjoyed Gears of War. How about Lost Odyssey? I enjoyed it, just cause to me it felt like playing some of the older style JRPGs just prettier looking. The random enemy encounters didn't even bother me...except in this one area, but still. I found Blue Dragon fun, but it seems to be a big hit or miss for many here.
You should also give a chance to some games on the Live Arcade. Some of there are a lot of fun.