I tested mine with a 30GB Venture MP3 player, which also acts as a USB HDD and it worked fine. I was able to play music and video (badly) from it as well as view pictures stored there.
I can't remember off-hand how it was formatted, probably FAT32. I haven't tried with an NTFS system. It's possible that it won't work with that, since it's licensed to Microsoft, and for a hundred pound laptop I don't think they'd want to add that license fee to the overall cost.
Perhaps someone who has their machine with them can confirm that this is the case? [I'm at the office just now, so can't!]