Even if you install the game to the USB, you must insert the disc every time you play. This prevents piracy. If you want to play disc-free, you would need to purchase the digital version from the Xbox Marketplace.
While almost any USB device will work, performance varies significantly based on the hardware you choose: install games xbox 360 usb best
Now go ahead—install those games, kick back, and enjoy your revitalized Xbox 360. The Ultimate Guide: How to Install Xbox 360
You cannot just plug a USB stick in and start installing. The Xbox 360 needs to format it specifically for console use. install games xbox 360 usb best