You do need a drive of some sort, as (like normal car-players, but unlike real Receivers) it loads its software from the drive. It only has to be large enough to be correctly partitioned and upgraded, though -- you could probably get away with 128Mbytes.
It might be possible, using a modified kernel, to get a Receiver Edition car-player to boot over NFS like a real Receiver, so no drive would be needed at all -- but AFAIK no-one's ever bothered putting the work in to try this, and it might not work.
Peter