This initial install will require an Xbox 360 Hard Drive or an external 16GB USB flash drive with at least 8 GB of free space. If using a USB flash drive it must be at least USB 2.0 with a minimum 15mb/s read speed and formatted for Xbox 360 use. A new USB flash drive is recommended to ensure optimum performance.
If you want to play the entire game from the harddrive alone, it's recommended to install the first disc to your Xbox, and install the second disc to an external USB.