No, the HD is not required for online play (At least, it wasn't when I last checked). Developers were supposed to assume that there was limited mass storage attached to the device (IE, a memory card) from what I can remember.
However, you can't really use the XBox Live Marketplace without something larger than a memory card, which rather kills one of MS's favoured ideas for the system.
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Last edited by Áedán; 19th February, 2008 at 12:07 PM.
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