Thought I'd post something I found on another site to warn you from getting the 4gb model of the 360 if you wanna play Halo: Reach online co-op .
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At only US$ 199, you can pick up a 4GB Xbox 360 slim unit. Quite an affordable price range, but with the release of Halo: Reach, those who opted for the to get the console for less are now realizing why it's so cheap. According to a report from Kotaku, this particular console is unable to support online co-op for Halo: Reach.

After picking up a copy of Halo: Reach, a Kotaku reader decided to play the single-player campaign with a few friends using his 4GB Xbox 360. He was unable to start a game and was left with a message saying, "One or more players do not have a hard drive which is required for this playlist," he narrated.

The support section at Xbox.com offers a similar explanation, "One or more players do not have a certified Xbox 360 hard drive attached to their Xbox 360 console. Some multiplayer aspects of Halo: Reach require an Xbox 360 certified hard drive."

Plugging flash drives into the system will not solve the problem, seeing as the game requires "an Xbox 360 certified hard drive". The game doesn't mention such a requirement, but it does indicate "features and requirements may change without notice". Problem is, these Xbox 360 owners could have really used that notice.

The 250GB "Xbox 360 certified hard drive" for that particular model retails for US$ 129.99 at GameStop. Add that cost to the US$ 199 console price, then you'd have paid about 30 bucks more than if you got a 250GB unit in the first place.