I do not use a Y Cable. I use a HDD with its own power source.
I have xkey v1
I purchased this USB Hub: http://www.ebay.com.au/itm/290496878611 ... 1497.l2649
1. It plugs into the xkey LCD
2. My HDD USB plugs into the Hub (external power source for the HDD)
3. My wifi dongle also plugs into the USB Hub
I can plug my 2nd HDD that is USB powered and then one part of the Y Split Cable plugs into the USB HUB and the other part plugs into the xbox 360 USB port to draw the extra power needed to make it run. A Y Cable that I use looks like this: http://cgi.ebay.com.au/ws/eBayISAPI.dll ... 0428643283
There is no "best" solution. It really depends on yourself.
For me I like external powered HDD's. Less hassle, no Y Cable needed and I do not have to plug into a 360 USB port therefore it doe snot stay powered on after shutting the 360 off. I need teh USB hub because I use a HDD and a wifi dongle