Microsoft announced that support for up to 2TB will be made a reality for the Xbox 360 later this year. This will be in a console update for the general public. For preview members on the other hand, you can try the feature right away.
Storage screen on the 360 showing off 2TB support.
Also to note about the update as Major Nelson points out, that they will no longer reserve space in advance on hard drives. That means you have full access to it for downloading games from the Games with Gold program.
