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: That means... it can't be plugged in when you start it, or it can't hold your
: profile, or what?
It can hold your profile. But your 360 won't be able to do anything because it'll say it doesn't have enough room to install an update and keeps looping into it.
You need an HDD installed,a large memory card installed (for an older 360) or a separate USB drive formatted as a 360 drive (w/ the 32GB limit) to actually get into your 360 and get on Live. Your profile can actually live on the FAT32 drive, and that's how this project actually works.