Yes. My first 360 came with the 20 gig hard drive and I got the red ring of death. So I bought an arcade unit, put my 20 gig hard drive on it and all my stuff was on it. The only problem is you won't be able to play your dlc, or arcade games unless you are on xbox live, or you do the license transfer.
But your hard drive will still have everything on it.
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Yes, it will be fine. The problem is in the 360 itself, not the hard drive, so if you experience the RROD, you can just go purchase another one, and not lose a bit of what you had stored on the HD.
Source(s):
Personal experience with RROD; questioning of the Xbox 360 staff when my 360 had RROD.

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Yeah that will be fine, Microsoft tell you to take the HDD off before sending it away, all you information will be fine, I had RROD a few months back and didn't lose any data at all, plus it only took Microsoft a week to get my Xbox fixed and back to me.
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