The Xbox storage limit for externals... I don't think there is any, because I once hooked up a 500GB external USB Hard drive to see what movies it had and it read it, as well as played the movies off of it(And I have the old xbox w/silver band for 3 years and no probs). the Xbox 360, to me, is the closest thing to a PC(That you can't mod or will be banned), being that it is primarily built for xbox 360 games and TV/Video streaming apps and alternative for internet surfing ONLY. So the 360 can read most of anything connected to it via USB
The limit is for when you use the device as 360 specific memory. The console will only let you use 32GB of it no matter the size of the drive itself.
What you are talking about is using a hard drive for music and video and are quite right that you can connect any size of drive for that, providing it is formatted as FAT32 or HFS+