, algorith wrote

No, supposedly MS will have 3GB on reserve for running their own things even while games are running. It has been suggested that Kinect might always be running, even during games that make no use of it.  Considering this is coming form devs using dev kits, it's all subject to change, but wasting so many resources would definitely diminish the quality of games. In the end it's software that makes it or breaks it (Gears and Halo made the xbox), but devs prefer the most powerful machines. 

On normal games, or on Xbox Live/other games?

Also, it depends what you mean by 3GB of reserve. Microsoft probably reserve 3GB of virtual address space for themselves, but that doesn't mean 3GB of commit (case in point: they reserve 2^63 bytes of memory on x64 Windows, but nobody has a system that big).

And finally it also depends what you mean by the OS. For example, if you're running Firefox right now, there's probably tens of megabytes of Microsoft dlls loaded into your address space. That's not wasted space - that's code that Firefox doesn't have to implement (like their own loader, graphics stack etc).

All I'm saying is that this number sounds wrong, and I'd put money on there being more to this story than meets the eye.