new arcade xbox's come with internal 250 MB storage device
1/ yes you can play normal games
2/ it really is only worth buying if you already have a 360 that got busted and you don't want to wait to have it shipped off and get a new one mailed back to you
3/ yes, you just detach the plastic cover on the side where the hard drive would normally go
4/ of course its better then PS2. better graphics, games ETC. if you meant PS3 then it is all preference, but i like xbox over PlayStation
5/ refer to answer 2, or if you don't really plan on saving lots of games or downloading content for games on xbox live then its ok. but memory is always a good thing when it comes to gaming
