Originally Posted by Äß§ý∩†H♠HäŽ€
Because it's Microsoft and they want you to buy there HD's. I'd personally be a little careful because they have banned over 1 million people for modded consoles now. I'm not sure if that happens with a non Microsoft HD too through. But I'd assume that they can tell what drive you put in there with built in software.
They don't ban people with modded HDDs, or at least I haven't heard of any yet. So far, they only ban people with modded consoles (being able to pirate games), this is done by modding the 360's optical drive firmware (DVD reader).
Modding the HDD is simply a cheap mans way of getting a bigger HDD for less. This is done by just voiding your warranty on your HDD as you will be taking it apart and replacing it with an flashed HDD (Sizes are 20, 60, 120, and 250? (not sure if they made the 250 yet)). It's kind of like replacing an HDD on an external casing.
My 360 has an modded HDD, it was originally WD 160GB external, and now it's an 120GB (I think now its an Seagate 120GB?) for the 360 and I haven't gotten any warnings or anything. However, they did make an update that makes third party storage devices (ie memcards) obsolete, but that's because that allows you to transfer saves. So the HDD mod is still safe.
I don't know which HDD are fully compatible, but people just told me to use an WD with BEV on the name. I don't think it matters if it were 5400RPM or 7200RPM. I would assume it would provide little to no performance.