So Uriel your saying that if you have a 4 gig hd, then getting a bigger one will make the game run smoother?
Your problem is that you have the 4gb Xbox Slim, right?
If so, then your problem
is that you don't have enough room. That's not even an actual HDD, it's 4gb of flash memory. That's not enough free space to power a game as large as Skyrim. It's not even enough free space to play Halo: Reach or CoD:Black Ops on Live. It'll work fine for offline play, but should you take them online, the lag will be interminable.
If you are having any problems with lag in Skyrim, or with texture resolution being N64 quality and you are playing on the 360 s 4gb system, then you just don't have enough free space in the memory to really run this game, so the processors are having to scale back on just about everything so that it will even possibly run.
While the Slim line of 360's comes pacjed with modern, up-to-date hardware and software, the two models differ very much in performance.
I run an Xbox 360 Slim 250gb HDD, and Skyrim hasn't given me any problems at all, at any time, ever. Even with 4+ games, DLC, music CD's, and special release videos from several game companies (Bungie, Red vs. Blue, etc.), my copy of Skyrim has about 190gb to use as available cache. The game uses nowhere near that much space, but it can take up auite a bit of it I'd imagine. Even when 1.2 was out, I had zero problems with Skyrim on either of my two Xbox's (my wife plays on an Xbox 360 Elite 120gb HDD, currently 77 gb free space on the HDD).
If the textures are as poor as OP says, then I do honestly believe that it's because the 4gb's of flash memory just aren't enough to handle a game as large as Halo: Reach, and it really can't touch Skyrim. OP needs to pop for an actual HDD... that'll probably solve most of his problems.