Xbox 360 4GB vs. Apple TV

Hey all,

I currently have an Apple TV but I'm considering taking it back to get an Xbox 360 4GB model. Given what I'm using the Apple TV for (Netflix, iTunes movie rentals), I figured it be worth it to just get the Xbox and a live Subscription to play a few of the Arcade games I wanted (with my 16 GB flash drive). A few things:

1. If I eventually do decide to buy a higher capacity hard drive, is it as seamless as if I bought one with the 250 GB hard drive already installed?

2. Are movie rentals really $6? Seems pricey. Is the selection at least decent?

3. I plan on going the WP8 route for my new phone. Any cool interactivity yet?

thx gaiz