Looks like the onboard memory on the Xbox 360 Arcade has been upped to 512MB from 256MB due to the inclusion of the Jasper board. Microsoft confirmed this fact to Eurogamer, saying:
"The Xbox 360 system software uses some of the included 512MB memory; less storage will be available to users. Additional storage (sold separately) may be needed for game saves, Xbox LIVE Arcade games, content downloads, personal file storage, and additional enhanced functionality. A hard drive is recommended for LIVE, and is required for some features," the company said in a statement. "We want to offer consumers a bit more memory at the same low price so they can enjoy more experiences on Xbox LIVE."
Now, I will write the story that I wish was the truth...
<fake>Today, Microsoft confirmed that the Xbox 360 Arcade would be shipping with a hard drive. Furthermore, the company will be allowing developers to use hard drive caching to increase the performance of their games.</fake>