It has to be a laptop hard drive. I had a old 20 GB HDD when I bought a new console, I had to pop it out of its casing and connect it to the slot in my new 360 (pretty much drop it a ton of times hoping it catches) but it works.
Don't think microsoft likes the idea too much and it worked for me, but I am also using a legit 360 HDD that they decided to make obsolete for whatever reason.