You can plug in an external hard drive if you want to use it for movies, songs, photos, etc. I do not know, however, if you can store downloadable content on an external drive, or if that can only be stored on the Xbox hard drive.
You can, however, buy a bigger xbox hard drive down the road, if you find you are filling up the 4gb drive with DLC.
Another reason to buy a new one over a used is the HDMI input. If you buy a used one, it might not have HDMI.