The following is excerpts from the transcript of the online chat with Microsoft's J Allard that Major Nelson posted on his blog. Some of the answers I thought bore a little extra scrutiny, so I've added some comments below.
Q: Can Microsoft guarantee that the HDD will be fully uitilised when present or are we going to see long load times with a slow DVD unit as standard from most developers.
A: just like last generation utilization of things like xbox live and the hard drive will be up to the game designers and just like last time we expect game developers to be excited by this. we have been in clear communication for more than a year that some scenarios will include a disconnected hard drive and it has not slowed them down
Comment: J Allard avoided this question. The fact is, whether developers chose to use the HDD or not, in the original Xbox they could always count on it being there if they wanted. In the Xbox 360, they cannot count on it. If they choose to spend development time and money on features that require the hard drive, they will be limiting the potential audience for their game. If they don't require it, but optimize some features for users with HDDs, they risk alienating gamers that choose not to add the HD.
There is no answer to this question that would sound good, so Allard chose to say something that sounds positive while not addressing the question.
Q: Why is the hard drive so highly priced? A 20GB hard drive now a days goes for about 20-30... why $100? I believe this will deter alot of sales..
A: one of the reasons that we designed a user removable hard drive is in direct response to the hard core gaming audience to make it easier to take game saves, game maps, soundtracks, etc. easily to their friends house or lan party. they also wanted the ability to upgrade to larger capacity drives. and if the drive is not present because someone in the house took it on the road, you still want to be able to use the console for movies, music or games.
Comment: I honestly wonder what gamers actually expressed a need for a portable hard drive. In a LANfest environment, I have a hard time imagining how it will be useful. If we accept that hardcore gamers are A) more likely to host or attend LAN events rather than just playing online, and B) more likely to buy the premium edition with the hard drive, then you'll end up facing a situation where the portable hard drive is useless because you can only attach one to each Xbox. The only advantage would be if you could bring the hard drive and leave the console at home. However, if your host has a hard drive, you'll have to disconnect his in order to use yours. The only solution for those attending LAN events but not bringing their entire console is to use memory cards, since you can plug more than one of those into a console at the same time. If you own a portable hard drive, you'll also have to bring the console as well in order to ensure you've got a place to plug it in. The only way this would be useful is if you force those who don't have a hard drive in their Xbox360 to bring their consoles, in order that those with the hard drive can bring just that. It seems unlikely to me.
Q: will the loss of HDD mean that all games will be made without the HDD in mind, therefore effecting users of the premium pack?
A: absolute not. consider this last generation where somewhere in the neighborhood of 20% of game consoles had hard drives attached. this did not deter game developers from utilizing the hard drive both for exclusive games and cross platform games on xbox. this generation our first party team and our exclusive content developers are just as committed to using the hard drive and like we they demonstrated with this generation our third party cross platform developers are committed as well. games like splinter cell, madden, and tony hawk all demonstrated unique capabilities in hard drive configured systems.
Comment: Allard's answer here defies both logic and common sense. Multiple SKUs with and without hard drives means that either Core owners without hard drives will be unable to play certain games or will not benefit from features optimized for consoles with the hard drive, or developers will spurn the hard drive and focus on the least common denominator platform. Microsoft can spin it any way they like, but they can't hide this basic fact.