can the xbox read a usb stick if plugged into the usb port on the x3cp? if so what format does it need to be and is there a size limit? im wanting to use it for movies and xbmc.

Yes, that's what the USB ports on the X3 front panel are for. Format is the same as all Xbox disks - FATX, and your MS dash will format it for you.

However, the limit is 4GB, and it's USB 1.1 so it's slow. You'd be better off installing a larger hard disk in the Xbox, or keeping your movies on a network share on your PC, or on a NAS.