So it appears that Microsoft is indeed releasing a base model for the Xbox 360 S. The new model will only include 4GB of flash memory. In order to increase the memory you must either use a USB hard drive or Thumb drives. Besides that drawback everything else is the same as the 250GB model and includes Support for the Kinect.
With the new Basic S model announced Microsoft also announced a Bundle that comes the the Basic S as well as the Kinect and Kinect Adventures for $299. The Xbox S basic will run at $199.
Source: http://www.thetechherald.com/article.php/201029/5915/Microsoft-prices-Kinect-and-debuts-new-4GB-Xbox-360-S
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