The Wii USB external drive rumour is dead. Here is what was found on DIGG

1- Be sure to have the latest Nintendo Wii firmware: (To have it actualized) // 2- Format the USB hard Drive to FAT32 // 3- Max 120GB (Though some website claims that a 300GB hard drive works too) //4- Remove Any SD card form the SD slot ///// The unit should detect your USB hard drive as an SD card.

Of course, on Digg it wasn't posted as a rumor but as straight fact. We tagged it as unconfirmed because -- let's face it -- that's exactly what it was. And since then, multiple people have given the instructions a whirl, and all have come to the same conclusion.

It simply doesn't work. However, it still is not out of the question for the future. IGN's FAQ page is constantly updated and still keeps hope alive:

Nintendo has also hinted that Wii owners may be able to connect a USB-powered external hard drive to the console, although it has never officially announced compatibility. Supposing this does turn out to be true, an exciting number of storage options become available.