Yes. ActionReplay works. You can either get the whole package (including hardware) or just get the ActionReplay software and try the usb route.
What I did was to make a usb adapter for the xbox and plug in a usb stick. After the xbox recognized it I put the game saves on the drive and modded the xbox. The hardest part was getting the required parts. The original game, the usb stick that works. FYI I used a 1gb coby mp3 player. I repartitioned it as a 16mb fat16 partition and the rest of the drive unpartitioned.
As for the hard drive I have a western digital caviar blue 160gb. Works. I've tried a few drives. Most of the 40gb variety that I tried didn't work. The larger ones did. You can use xboxhdm to "test" a drive before you try to use it as a xbox drive. If it says that it can be locked then you're good to go. If locking is not possible then you have to get a different drive.