The hard drive just pulls away from the top of the console
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On the older Xbox 360's, at the top. The Xbox 360 S, the hard drive is located at the bottom of the Xbox.
The hard drive is in the 360 for alot of different reasons. Many uses of the hard drive include: * Downloading Xbox 360 and Xbox originals * Accessing music * Accessing videos * Saving data for games
The Xbox Arcade is an Xbox 360 and it comes without a hard drive. What you are calling an Xbox 360 I'm assuming comes with a hard drive and if you are thinking of buying an Xbox I recommend not buying the arcade as you cannot save games without a hard drive.
How much can the XBOX 360 20GB hard drive hold?
yes you can but you will need a hard drive