"We can confirm that we are moving to internal memory for the Xbox 360 Arcade," the company informed Xbox 360 Fanboy. "The physical internal memory is the same size as the previous external memory units - 256MB."
Apart from a loss in portability, the 256MB of internal memory will have the same fucntionality, storing downloaded content and game saves, as the external unit.
Microsoft made no mention of the oft-reported Jasper motherboard that is supposedly included with the newer units and is believed to be more reliable than past models. Instead, the company stuck to its usual response that "it is constantly updating the console's more than 1700 internal components."