Xbox 360 not updating via usb
Turn off your Xbox 360 console, then disconnect your flash drive.
Scroll left to the Marketplace tab on the Guide window, and select the "Game Marketplace" option, then the "Games on Demand" option.This requires a nearly automated configuration process for the portable USB drive.And, once configured, users can put game content on any Xbox 360 into which they plug the flash drive.In the past, Xbox 360 owners had two options for storing game content: a hard drive or Xbox memory unit.
In spring 2010, Microsoft released a software update allowing console owners to save data on most USB flash drives.By configuring a USB memory device, a user can download an Xbox 360 video game from the Xbox Live Marketplace for .99 or .99, and save it to the USB memory device to play on their system, or any other Xbox 360. You can also select the "Customize" option and move the slider for Reserved Storage to select the amount of storage space on the USB storage device.