This is an old and persistent rumor. As most of you know, there’s a 50 MB size cap on Live Arcade games. The limit is there so that people without a hard drive can put purchased Live Arcade games on the Memory Unit accessories that Microsoft sells.

However, upcoming Live Arcade game Castlevania: Symphony of the Night, a PSone port, will break the limit with Microsoft’s good will, and that kind of “flexibility” from the makers of the Xbox 360 might become more common in the future.

Or is it just something that Microsoft’s PR reps are saying for now, not wanting to give away an impending announcement regarding a higher size limit for Live Arcade games? 1UP seems to think so, with sources saying that the limit will be upped to 250 MB, with the possibility to make games towards 450 MB i Microsoft says it’s OK. In other words, if this is true people storing Live Arcade games on Memory Units can kiss that method goodbye.

Or can they? E3 listed a new Memory Unit for the Xbox 360 and it might be coming out soon since retailer EB Games lists a 256 MB version for launch March 1. I sincerely doubt that will happen, however, since 256 MB still would only cope with one maxed Live Arcade game if the limit is upped to 250 MB. A 512 MB version is far more likely, however I wouldn’t bet on that either.

Let’s face it, today there’s a limit of 50 MB for the Live Arcade games and Memory Units are 64 MB. In other words, you can fit one game onto there. At $40 a piece, who buys Live Arcade games and stores them on Memory Units?

Microsoft wants us to have the hard drive, and I wouldn’t be surprised if a stronger push for Live Arcade games, bigger ones at that, is a way for them to get their way. We already have full Xbox 360 games requiring the hard drive, so why not?

I firmly believe Microsoft will boost the standard Live Arcade limit, perhaps to 250 MB but most likely not higher. There’s still that little issue of having to download the games. Then again, some game demos are over 1 GB and they’re downloaded in very large numbers.

There’s another point to consider as well. The Live service is the thing Microsoft can really point on when compared to PlayStation3. Sony is nowhere near the kind of solution that Microsoft is offering, and even if they where there’s still the fact that Live has been around for quite some time.

Expect more on this in the future. Perhaps coinciding with the European launch of PlayStation3, rumored to be March 23, or in August. That’s my guess. What’s your take?