So we have to be able to load these high-res textures into a 'tiny' cache, really fast. Basically, we're always streaming like crazy, and to get the best streaming performance we stream from the HDD and DVD at the same time. We also stream UI textures and audio, and keeping everything prioritised correctly while still avoiding the overhead of seeks is pretty tricky.
For the technically minded, we stream medium-resolution textures from the HDD, which has the best seek time and can load textures quickly. The top texture mips are streamed from the DVD with some additional compression for throughput. Also, having the top mips on the DVD avoids us having to copy them to the cache partition, which is good because we're pretty tight on space there!
This is why there's no Games on Demand download available as we didn't want fob people off with an inferior experience. Similar deal for 4GB Arcade kits and USB sticks, flash devices have much better seek times than a DVD, but the throughput is lower. For lot of games, the seek time dominates loading, but on Titanfall 360, we worked really hard to optimise loading for DVD/HDD, and running off flash just didn't give the same performance.
So, we copy the texture-streaming data to the Xbox 360 cache partition, which is located on the fastest, outside part of the drive. I'm pretty sure this is what Halo is doing when it's showing the pretty particle effects before you start a new level. Also, using the cache partition guarantees that the installed files aren't fragmented, giving really consistent streaming performance. I tested it at home on an original 20GB HDD that I've had since 2005 and never re-formatted, it works great!
