It helps with loading times for most games, but not all. You'll notice it a little more in bigger games like Skyrim or Fallout, you'll maybe save 5-10 seconds per screen. The games are all designed to run off the CD so despite what some people say about better or smoother graphics, that's not true at all. The best thing about loading them on the hard drive is you don't have to hear the loud DVD drive while you are playing.
Yes you can expand the 4gb model with a hard drive later on. The HDD is the size of a laptop drive, but you can't use any drive.. You have to buy the ones provided from MS, which are pretty overpriced..
Good list of games where the HDD helps loading times:
http://www.cheapassgamer.com/forums/...d.php?t=202456
$100 for 250gb
http://www.amazon.com/gp/product/B002I0JDC6
$125 for only 320gb
http://www.amazon.com/gp/product/B005PSTV2K