I would in any case call xbox support and see if they can't do anything for you.
Repair...nah, selfrepair....nah.
4gb xbox360 slim.....maybe.
A new xbox slim would be the best choice, if there wasn't the money issue, believe me I know, but a 4gb model is just barely enough to hold some saved game data.
No easy answer in this case. E-bay is not really a great option either, the last time I looked ( in all xbox cathegories btw. ) no real deals were to be had,
meaning something I'd trust and would be willing to spend my hardearned money on.
I would seriously save some money for a while, trade the current xbox in, even if they won't give you a lot, keep the HDD and get a data transfer kit and an xbox360 slim with a HDD, the 4gb on the arcade model are only internal memory.
It does seem to be more reliable, plus you can't even hear the thing after you turn it on.
Getting a PS3 is a so-so thing, since I am sure you build a library of games, achievements and gamerpoints, so switching consoles is not as attractive as it might seem.
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