From what I understand, keyboards/mice work out of the box. At least, the ones tested by other users worked.
External storage media only works with StickMount (possibly other apps, not sure). StickMount requires root, so naturally, your device needs to be rooted.
Users have confirmed that flash drives 1-32GB in size have worked. Another user posted an image on XDA forums showed a screenshot of his Nexus 7 playing media from a 1TB WD external hard drive.
Source:
For those worried about lack of storage (USB-OTG discussion thread) - Page 33 - xda-developers
His opinion said playback was decent some of the time, and rather meh at other points. It sounds (at this point) like it may have been the media player he was using, where app-software updates could potentially fix down the road. It also sounds like he didn't try VLC though, which may be the winning ticket in itself.
FAT32 and NTFS sound like they leave something to be desired (surprise). I think I heard NTFS was read only or something. EXT3/EXT4 is the preferred file system, which can be acquired through GParted LiveCD or through a native Linux installation. No idea on other options or partition editors for Windows that could take care of that.
Personally, I have the 16GB Nexus 7 coming, and I'm pretty excited for it. I doubt I'll ever max the onboard storage (based on what little I have on my phone), but with some trips and flights coming up it's very welcoming to know I can bring along a massive flash drive and mix/match other media around to burn through time if I'm caught on a massive layover. Ironically, even if I had a 64GB variant of the Nexus 7, I'd still be hitting a limitation in regard to what movies I was planning on bringing with me when I start traveling a little later this year, so either way I would have been in a small bind. Unfortunately I think MicroSD card slots will become less important as onboard storage becomes more plentiful and/or people begin to rely on online services more, along with the obvious factor that manufacturers are trying to maximize every nook and cranny for jamming the latest chipsets in. I'd much rather lose a micro SD card than my audio jacks, etc. Can't say I'm a huge fan of it, but I see the writing on the wall. That said, this alternative sounds like an easy way to at last swap media around, allowing me with endless storage if need be. That way I can use the device as is on regular day to day operations at work without hassle... or if I'm on a 6 hour layover, plenty of additional entertainment if need be.
