Microsoft’s Larry "Major Nelson" Hryb, while talking with Xbox360fanboy.com said that some of those Xbox 360 owners without a hard drive will not have the space for the new Xbox experience. But he also said that MS was working out a storage solution.

"To help ensure all Xbox LIVE members are able to download the New Xbox Experience and enjoy its new features, Microsoft will be offering storage solutions to the Xbox LIVE community."

Online storage for your local Xbox environment? It sounds a bit dodgy to me. I guess if they could cut down the size by keeping the less essential pieces out of the base install they might be able to do it. Images and the like could be sent out from remote when necessary. Switching from one tab to another could also be accomplished in the same way if the content to be displayed on the tab were kept remotely.

No matter what the solution it means that if they don’t get it done in time that ’small percentage’ won’t be able to update when the time comes. GDN will be on the lookout for further information so check back.