Joystiq has received documentation and confirmation from two separate sources that point to the Xbox 360 receiving USB Storage Support in the upcoming 2010 Dashboard update.

Once the update hits this Spring, people will be able to download Xbox Live Arcade games, Xbox Live Indie games, Games on Demand, DLC and Title Updates to a USB storage device. So yes, you can carry your copy of Splosion Man in your pocket.

From Joystiq:

According to the document, the USB mass storage device must be at least 1GB and the system will do a compatibility check. “The system partition occupies 512 MB of space, and by default the consumer partition occupies the remainder of the device capacity, or 16 GB, whichever is smaller.” Upon inserting a blank USB storage device, “consumers are offered two choices: ‘Configure now’ or ‘Customize’.” The “Configure now” option will use “the entire device capacity, up to the maximum of 512 MB plus 16 GB” meaning, regardless of the overall size of the device you’re using, the Xbox will only enable 16 GB of usable, non-system storage. The “Customize” option will allow you to “preserve some pre-existing, non-console data on the device” such as music.

What does this mean? Means Microsoft is looking to get out of the Memory Unit business fast. Memory Units, sold with Xbox 360 Arcade consoles and consdered to be the Memory Card for 360, are capped at 512 MB, with many Xbox Live Arcade titles going well over that limit. By allowing USB support, Microsoft is making the Arcade unit a bit more appealing to a new 360 owner.

And with news surfacing about an “Xbox 360 Slim,” they’ll need to get rid of those old units somehow, right?