A hacker who goes by the handle "TheSpecialist," who was one of the first hackers to modify the Xbox 360 DVD drive firmware to play backup games, has released a tool that allows any Western Digital BEVS SATA hard drive to be used on the Xbox 360. Considering the official 20GB drive retails for $99.99 and a cheap 40GB WD Scorpio drive goes for $50, this can save 360 gamers a lot of cash. Unfortunately, a current limitation to the hack is that sectors copied from a 20GB will leave a 40GB drive with only 20GB of storage on the Xbox 360. The process is, thankfully, completely reversible through the HDDHacker software.
The software tool works as described in the documentation: "x360 HDD"s contain information on sector 16 about the HDD: the HDD serial number, the model, the firmware version and the size in sectors is stored here. The x360 asks the HDD to identify itself, by sending an "IDENTIFY DEVICE" ATA to the HDD. It will compare the returned information to the info that is stored on sector 16. This information on sector 16 is signed and thus can not be changed. This tool will mod the FW from the WD HDD to comply with the information on sector 16, so that the "identify" information will match the information on sector 16 and your x360 will accept the HDD as valid."