This is not really surprising, I'm not sure why people are getting all freaked out. Look at the 360 arcade vs the 360 slim. While arguably you can play any game that is disk based on a 360 arcade but not all the features might be available. To play shadow complex on the 360 you would need to get a HDD for that unit. Since the largest memory card for that unit was 512 MB and shadow complex is over 800 MB if I recall.
First, those were differences known from day one of the 360s release whereas this change is 3 years in. Second, there is a big difference between storage and processing power.

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