Yes, absolutely. You need something like 8gb i think just to install it, and you MUST install, because it comes with 2 discs; install and play. I think you can buy a larger drive now for something like £20-£35.
Don't get too disappointed just yet, if you have an 8gb usb flash drive laying around you could use it..
Why waste your money on a 200 dollar hard drive when you can just buy another WITH a full hard drive Xbox for 250 ?
Or get a HD from an old 360 and take it apart. Take the actual hd out of the case and plug it directly into the side of your xbox 360 slim. This is the route i went on all three slims in our house..