Got it and messed around with it. LOVE how the new update gets rid of the hard drive install crippling on banned consoles.
It formats the stick as FAT32 with a hidden folder called XBOX360. It uses just over 500mb as a system cache (Data0000) (ie, unusable for content) and then a 1mb file for a partition table (Data0001) and the rest is the actual data broken down to 1gb chunks.
It is essentially a virtual drive imaged to a FAT32 USB device and it appears to use an XTAF (same file system as the 360 HD/MUs) file system on the virtual drive.
Give it a week and it will be hacked to hell. Actually hope I'm wrong due to the implications for online cheating being made easier.
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