Yes
the regular 360 console has a biggerhard rive than the arcade it also looks better!
YESSS!!!:)
Yes.
The Arcade console supports all xbox 360 games.
No, it is a download from XBox Live Arcade.
The arcade unit does not come with a hard drive, headset, or ethernet cable.
No.
You don't need live to save games to the hard drive the game will simply ask you to create a new games save and off you go. If you have a memory card too the game will give you a choice of which device to save your game on.
I believe Xbox360 Arcade is a part of Live. You can actually access Live at any point so long as you're connected but if you're on a silver subscription which, is unpaid then you are limited and don't have access to multi-player gaming and other features.
Xbox360 Arcade only comes with out of the box with internal memory. There is no hard drive. If you want to transfer profile data and achievements you need to have a xboxlive account on the original xbox and recover the profile on the new elite. If you have purchased a hard drive for the arcade you can still transfer the data to the elite. Here is a helpful link: http://vgstrategies.about.com/od/xbox360faqs/a/Xbox360EliteTra.htm
yes you can, the type of xbox360 it is (elite, pro, arcade.) does not affect who you can play xbox live w/. the main difference is memory in hard drive, and the elite is black. The arcade can't play old xbox games