Extranal drive will do The 360 ONLY supports WMV 9+ at the minute, but it will read those movie files from a PC (or Mac with 360 connect (I'm really a PC, Mr 360)), a CD, a DVD or most USB devices. Strangley, the 360 will read MP3s and Photos stored on an Ipod, but not movie files, even though it it set to be a USB drive.