The article is kinda old (March 8), but it's still very interesting.

Jason Olmstead (from mini-itx.com) wrote a document on how to install a PC inside the Xbox case.

The Introduction:

My whole plan was to put a PC inside of some type of super small case and use it to play ROMs on a TV. Who wants to sit infront of a PC and play old Nintendo games though? That's what I thought. That's where the idea for the box came up. I wasn't sure what to put the box in. Someone has already put a PC inside a Nintendo, but I didn't want to be a copy cat. I managed to score an XBOX that was gutted on eBay for about $20, so I decided to use that as my starting point. I also got my hands on one of VIA's tiny EPIA motherboards, and a very small ATX/ITX compatible power supply. For the hard drive, I had to keep it small to keep the whole project inside the case. I didn't want anything outside of the XBOX shell... the whole idea of this project was to keep everything self-contained and very modular say I wanted to take it to someone else's house. The only choice for a hard drive was simple - laptop hard drive. My friend Chris York had a 3.2GB laptop drive that he sold me pretty cheap. It had more than enough space than what I was going to use it for, so it was perfect. I was then able to buy a laptop hard drive converter on eBay that would allow me to use it on a normal PC motherboard. It works pretty well.

News-Source: http://www.mini-itx.com