The arcade system is definately backwards compatible if you buy a UK hard drive. My arcade system won't play Oringinal Xbox games as my Hard Drive is from Hong Kong too. So far, i've:
Tried my Original games on another system - They work fine,
Tried a UK Hard drive on my system - Games work...
I also have this original problem. I bought an Arcade pack 2 months ago and bought a 20GB Hard Drive off ebay from Hong Kong cus it was really cheap. The drive saves all my 360 game data and live settings etc, but it does not play Original Xbox games. The system recognises the discs as it shows...
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