Hacking my xbox is a question that has come up a number of times. There is the obvious reason, enable playing of pirated games, but I'm just not into that. But when I look at how my buddy has converted his xbox into a suh-weet media center, then I start to really think about it.
But not for long. I always decide that it isn't for me. "Why?" you ask.
Consider this: Microsoft has explicitly stated that they'll disable Xbox Live if they discover the box is hacked. My impression is that this isn't just for that box, but for your gamertag, and quite likely for any account trying to use that credit card. Heck, they could even go and disable it for anything associated with your MSN Passport login. They have a number of bits of information about "you" which can interrupt your use of Xbox Live quite permanently without some effort on your part.
I haven't blogged about the 360 much here (yet), but its integration with Xbox Live is brilliant. Live is always there. Last night, I spent three hours playing Elder Scrolls: Oblivion. The entire time, I was on voice chat with my buddy while he played. The game is single player only, but the two of us could talk about what we were doing, what we found that was cool, or simply be quiet while engaging in heavy combat.
Do I want to risk that? Not a chance. Without Live support, the 360 would be a ghost of its real self.
Xbox modding can be nice, but the potential cost is just too much for me. Be careful out there.