and do I need xbox live to download firmwares and system updates?
Yes, XBL is needed to D/L sytem Updates for the 360 itslef and also needed to D/L patches for games but you don't need to pay for membership for theese (Just in case you didn't know XBL is split into two memberships: Silver - is free you can get updates and patches and some DLC: Gold - needs to be paid for £40 a year in uk dont know how that works out anywhere else and you get all the features of silver and you can play games online and get any DLC released on the marketplace), It's also Neccesarry (Lolwut sp?)if you want to get DLC (Download Content) for your games in which case you definantley need bigger than a 4gb. The Xbox 360 Slims are A lot more reliable just make sure to blow out (thats what she said :hubbahubba:) vents every now and then and you should be fine with one, but you most definantley want at least a 60GB or 120GB hardrive
TBH I don't know why M$ brought out the 4GB, its usless lol.