Yes they do work, but the OP said they was thinking of getting a 4gb xbox, from memory the old xbox only started with 120gb memory.
I might be wrong here but I don't think the cable works the other way around, it will transfer small to large, but not large to small.
A 4gb xbox would be a waste of money, as that 4gb will get full very very quickly, for example the dlc for Red Dead Redemption, Undead nightmare will destroy 1gb of memory. Also when you un-box that xbox, you only have 3.5 memory really due to dash boartd updates and other internal memory settings.