to add to the conversation, you won't have 20GB of available storage space on the 20GB hdd. you'll have about 13GB free after the way that the hdd is formatted as well as the required files that microsoft loads onto the hdd as well.
as to why you won't load your purchased games onto the hdd, I can't understand the logic behind that (especially if you have the space).
1) it cuts down load times (and its much quieter even with the newer system and new hdd's than listening to the hdd spin up with all of the reads
and 2) it's easier on the optical drives laser since you aren't reading from the dvd's all of the time.