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Essentially they are using 4Kb sectors instead of the current 512 byte sectors. Long story short, with higher capacity drives, the storage system needs to be more efficient as they storage medium becomes more dense. This density is required for the large capacities. Problem with older OSes (as Jake pointed out) is that they don't properly align the sectors, causing huge performance decreases.

Check out http://hothardware.com/Reviews/WDs-1TB-Caviar-Green-w-Advanced-Format-Windows-XP-Users-Pay-Attention/. Can't say if they are working on a fix for it in a future firmware, but for everyone that connects local storage, I hope they do! So for now, no large drive support. It might have something to do with accessing not supporting GUID partition tables also.
 
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