I’ll outline why it’s a bogus rumor.

See, the rumor started because of a survey. Essentially, the user was asked what they connected to their Xbox 360. One of the questions asked if they stored content on their Zune, as a means of taking it off of the hard drive. But, the question was poorly worded.

What the question meant to ask was “Are you storing pictures and video on your Zune, because your Xbox 360 hard drive is full from game and marketplace content?”

When you realize that’s what they were asking… you can see how the rumor got started. Microsoft does want to know that this is an issue, because over on the PlayStation 3, people can use all kinds of storage options… it takes only a few minutes to upgrade the hard drive with one of your own (and not pay Microsoft’s six-times-cost markup for their puny 120 GB hard drive). If the PS3 is luring away savvy customers over being able to have unbounded storage options… Microsoft needs to tackle that issue (with more than the obnoxious-highway-robbery of their hard drives, of which, I refuse to pay… and use my Xbox 360 less because of it).

Still, that’s not to say this won’t ever happen. Microsoft has always had the option of allowing people to store game content on USB hard drives. Heck, Microsoft could release a $20 SATA sled and let you use your own hard drive (a la PlayStation 3). If this rumor does turn out to be true, it will be another instance of people wishing and willing, and in turn forcing, Microsoft to change their tune.

Starting today, you can get a 500 GB 2.5-inch SATA drive from Best Buy for only $199.99.

(The product pages haven’t fully updated. To find it online, go to the Best Buy Homepage and type 8906428 into the search bar on their site).

Now, it is inside of a USB 2.0 enclosure, so you do have to take the enclosure apart. And, this does run the risk of breaking the warranty (since whoever made that drive probably won’t support it directly). What drive is on the inside? I suspect a Travelstar 5K500 from Hitachi. SimpleTech normally uses Western Digital drives, but WD doesn’t yet have a 500 GB 2.5-inch drive in production.

Is this a good deal? Considering that 320 GB drives (also in USB 2.0 enclosures) are still hovering around the $100 to $120 range, I’d say so. Also, considering 500 GB 2.5-inch drives start at over $265, yeah, it’s a good deal.

Note for novices: Hard drive makers routinely sell drives inside of a USB 2.0 enclosure for less money than the drive normally costs for use inside of a laptop. It’s a sneaky supply-and-demand tactic that the hard drive makers engage in. Of course, there’s nothing stopping you from taking the hard drive out of the enclosure, and installing it inside of your notebook.

This is a very good deal for a couple of reasons. First, it’s a small hard drive with huge capacity. It only needs a single USB 2.0 cable to power the drive. This makes it a great Time Machine drive for your Mac.

Even better though, is the fact that you can quickly and easily open the case, and pull out a SATA drive. See, Western Digital is artificially knocking down the price of USB 2.0 drives, while keeping the cost of internal drives high. How do we work around this? A simple credit card will do the trick.

By sliding a plastic card (say, your credit card) into the plastic mold line of the case, you can easily pop the top off. Inside reveals a Western Digital Scropio SATA drive. You can then pop that into any 2.5-inch SATA system. It makes a great upgrade for a MacBook (Pro), Mac mini, or even a PlayStation 3.

You should keep the casing for warranty purposes (if the drive fails, you should probably slip it back in the case for replacement). But, as a nice plus on that end, you can use the drive as an enclosure for any SATA 2.5-inch drive… like the old smaller drive you pull out of your system.

BestBuy.com (Linking to the page isn’t working right now, just type in 8621397 into the search field).

I bought three of these the last time it was offered at $134.99, and I’m about to buy a fourth…

Update: Linked in one of the 10% off coupons. As I was picking up my fourth one of these drives last night, I noticed stores are starting to run slow. These drives use the old packaging, so I would say that it’s fair to call this a clearance… even though Best Buy is marking it down as a silent promotion.

In other words, if you want one, go get it now.

Update 2: As noted elsewhere, there’s one more thing you should do during installation. If you look to the right of the SATA ports, you’ll see a jumper. Remove that jumper before installing the drive. It basically tells the Scorpio to use a special “green” power mode. While the typical green drive is fine, this jumper forces added wait times and slowdowns to ensure that a single USB cable will provide sufficient power. Since that is not needed in a true SATA environment, removing that jumper will give you an instant performance boost.

My Home Server only has two SATA ports, though I’m thinking of expanding to a new system with four. So, once I had filled those up, I went outside the box and plugged a SATA 2.5 GB Seagate in with USB 2.0. Eating up three empty USB connectors (a whopping two for power, and one for USB data)… everything seemed to go fine. Until I got home one day to hearing constant knock-of-death noise.

Thinking the drive was dead, I unhooked it from WHS and plugged it in via eSATA to my MacBook Pro running Vista. The nice thing about eSATA, is that you can run drives and have the full range of diagnostic tools… eSATA has all the SMART diagnostics that PATA and SATA do with internal drives. To my surprise, the drive passed all tests… repeatedly, even on full sector scans. The conclusion? The enclosure isn’t passing proper power, and in a server environment, those subtle power problems can crop up in the form of failures.

Bottom line: Windows Home Server is now going through the hours-long process of removing the drive (to be safe, rather than using the backup copy on another drive, WHS moves the data from the original drive to another hard drive when possible).

The good news is, enclosures are getting dumber. Meaning, they’re doing less. For example, eSATA enclosures have no real need for a bunch of complicated chipsets or circuitry to get in the way. So, if you’re going eSATA, I’d say you’re fine with going cheap. If not, and you’re using USB 2.0, I’d go with high-end gear. FireWire is a bit of a mixed bag… with fewer chipsets, there are fewer cheap bad guys; go with an Oxford chipset to be safe however on FireWire.