Was silently implemented in latest dashboard update
Even though the latest Xbox 360 dashboard update was pushed last month, Microsoft didn't really feel the need to let everyone know that they doubled the USB storage limit from 16 GB to 32 GB. Apparently this was known (I myself had no idea, despite participating in the beta for said update), but Joystiq received confirmation today from Microsoft that this is a feature here to stay. This is what they had to say:
Yes. The more our customers use their profile and download digital content, the larger the file size necessary to store that content and move it between consoles gets. Therefore we increased the size of the memory to enable our customers to take more of their Xbox profile with them on the go.
So, there you go! If 32 GB isn't enough on-the-go storage for your needs, just remember all you have to do is download a sh*t ton of content and use your profile a lot to get Microsoft to double it again. But do you really need more than that?