Some very intrepid forum posters on Cheap Ass Gamer have noticed an unannounced feature of the upcoming Xbox Dashboard update.  Apparently, those who have been admitted to the update preview program have noticed significant decreases in the size of Xbox 360 game installs.

This was later confirmed by Digital Foundry, who stated that most games saw a 5-10% reduction in install size and that smaller games saw even more dramatic reductions.  For example, King of Fighters XII’s install size dropped from 3.4GB to a tiny 703MB and Left 4 Dead’s dropped from 5GB to 3.7GB.  Notably, Fable II saw no reduction in installation size.

Digital Foundry, by checking these install sizes against the size of debug review copies, has concluded that the installations select necessary data more efficiently, resulting in less needed drive space.

This is fantastic news for 360 owners still trying to wedge more stuff into their paltry 20GB hard drives (like myself), and good news for those rocking 120s.  The update goes into effect August 11.