4G has flash.
250G has HDD
both of them are storage, not memory. nothing to do with reading the CD.
however, the new xbox360 support u***** flash drive. based on my experience, you can use a 16G flash drive (I tried a 60G ipod and only 16G usable). this way, you will have unlimited storage.
the xbox 360 4GB with kinect bundle is a good buy. so much fun.