Microsoft has confirmed that Halo 4's multiplayer needs either an 8GB USB or an Xbox 360 hard drive with 8 GB of free space.
Microsoft also "Recommends" using Built-in hard drive for the "optimal experience".
But if you own a Core, Arcade or 4GB Slim Xbox model you'll either have to buy a bigger hard drive or use an external flash drive. Microsoft recommends using one of the official pre-configured Xbox 360 USB flash drives by SanDisk. Other flash drives can be used, of course, but must be configured accordingly.
It's Good that Microsoft Posted this info Now so Last-minute confusion will be avoided
Source : IGN