GameStop has leaked information about those official Xbox 360 USB hard drives we've heard about (first rumored and then officially), and they ain't cheap. According to the confusingly similar GameSpot (who saw the prices temporarily listed on GameStop's website), there will be both 8GB and 16GB drives available, the smaller for $39.99 and the larger for $69.99. According to Major Nelson, we'll see them in stores in May.
Of course, the system update will also allow you to use any USB drive (not just the official Xbox-branded ones), but before you get visions of 1TB of storage plugged into your Xbox, remember that there's a 16GB limit on each of two possible devices, so you can have only 32GB total. Fortunately, an unofficial 16GB flash drive is about half of Microsoft's price over on Newegg. You may have to tweak things a little bit, as the official drives are meant to be "plug and play," but it can't be that complicated. The GameStop listing is down for now, but we'll see these drives officially in just over a month or so anyway.