I don't really want to buy another damn memory card just for a update. Is there any way around this? It always asks for 128MB memory card and I would REALLY like to use the Windows 7 Media Center.

No.

you might qualify for a free memory card or a cheap ass 20 gig hard drive courtesy of microsoft. visit xbox.com for details.

I thought you could still use NXE you wouldn't be able to use netflix and I think you have to keep setting up the avatar but don't quote me on that cuz I haven't used my 360 without a hard drive.