Lifehacker has a very nice comprehensive guide to how to mod an old school Xbox so you can run Xbox Media Center. Things have come a long way from the "crack open the Xbox and solder in a mod chip" days.
We've been running XBMC for years, and it is the best reason to own an Xbox. We actually have an Xbox that has never played a video game, but only runs XBMC at 1080i to our HDTV.
Get a cheap used Xbox on eBay, the Xbox DVD remote, and a wireless adapter, and you have the best media center box on the planet for <$100 (if that).
I keep all music, photos, vids, etc. on our file server, and access the files on the XBMC boxes (yes we have a couple of them) Having photos randomly cycle on large flat panel display at 1080i is amazing...
If you're feeling brave, the hack is even easier if you have a friend that has already modded their xbox. They can FTP the save file to their xbox, and use the xbox memory card management features to copy the save to a memory card (don't need Action Replay to do it from a PC)
As an added plus, many console emulators have been ported to the Xbox. Once you have the Xbox modded, you can FTP files to and from the Xbox. It is a nice diversion to play old Atari 2600 or NES games with a real console controller (alas, 1080i HD resolutions don't help them much ;-)
UPDATE: Lifehacker has a followup post on some advanced features of XBMC that is also worth a read
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