Aaron Greenberg, Microsoft's group product manager, told Game Theory yesterday that the 120GB external drive for the Xbox 360 is not overpriced at $179. Said Greenberg, "If you compare what we are offering with a real plug-and-play drive the closest thing would be to take a 120-gig self-powered external PC drive, and in that case we are seeing those retail at anywhere from $160 to $200 for comparable laptop-sized external hard drives."
Greenberg probably doesn't want you to know that he's wrong, but he's wrong. Sure, you can pay $200 for a 120GB drive if you really want to, but as with most products, there are plenty of deals to be had; unless you're locked into buying peripherals from a single manufacturer that controls its monopolistic pricing with a proprietary vice-grip. Which, in the case of the Xbox 360 ... you are. Though if Greenberg had said, "We own you. Deal with it," that might not have been as good for PR.
They own you. Deal with it.