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For your needs, I'd get a PS3. I prefer the XBOX 360 as I'm more into online gaming, but that's not for everyone. From what I've heard from friends, GTA4 on the PS3 is better than the XBOX 360. This is mainly because you install it on to the hard drive ahead of time and it cuts the long loading times so you don't have to sit through them.
I'd go with a 40 GB if you're not a hardcore gamer. If you're hardcore, go for the bigger one.
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