Sweet, allowing a USB hard drive is a good idea. Why couldn't MS do that? Anyway, I have a spare 30 GB external drive lying around. Upgraded my laptop hard drive, and got an external USB exclosure for that for around $10. Anyway, I wouldn't think it would be too hard to lock it to the hard drive for most people. Just use some information you get over USB (does anyone know if there actually is any?), upload that to Nintendo's servers, have them sign/encrypt the data (which would include your serial number), and then check it on playing. Then they just have to make sure they don't leak their private key. Perhaps they could have two, one to encrypt the static data, and one to encrypt your HDD information.
Anyway, I kind of hope they offer a cheap subscription service, like Yahoo Music Unlimited or whatever, only for games.