The Arcade version is for those who might not have enoguh cash but still just want to have fun with an Xbox.It has limited items, such as only a 256mb memory card, a Standard AV cables, and no Headset.They even added 5 Arcade games from Xbox Live, hence the name, for you to enjoy the taste of the Console before you actually go out and start getting the actual games.It's basically like the old Core version, but slightly more better while having the same price.The Premium version is for those who really want the Xbox fully. It has a 20GB detachable Hard Drive, a Headset, Composite SD/HDMI cables, Xbox Live Gold (1 month free), and 2 games Forza 2 Motorsport Marvel Alliance.It's basically the normal and complete set of the Xbox packages. Plus 2 complimentary full games.Another version would be the Elite version, now this one is more advance as it comes with everything the Premium has, plus a HDMI cable and a 120GB hard drive. Plus, it comes in Black (stylish, eh?). Don't know much about the Halo 3 thing .. I'm playing it and so far it's not causing anything to my Xbox (I got the Arcade version, btw)