There's a project to port Linux to XBox. Since Microsoft is almost giving the hardware away, with the idea that they'll make money on the gaming software, this would blow a huge hole in their business strategy.

This is kinda old news actually. The threat to Microsoft is hugely overblown. After you factor in the hassle factor of doing anything useful with the Xbox as other than its intended purpose this is revealed as more of a stunt than anything else.

Consider: The Xbox is a bargain for only one thing: games. For just about anything else it is a PC of rather low specs with a lot of hassle factors thrown in. Only 64 MB RAM shared with the video and a smallish 8/10 GB HD, depending of brand in that production run. People may talk a lot about treating it as a little server, etc but you could just as easily get an old-ish PC of better specs and fully accessible with PCI slots and the full array of ports. Need another NIC? Just drop in a $10 card. Want an analog modem, etc? Same answer.

In September you'll be able to buy an nForce2 motherboard for $150 that gives the same audio as the Xbox, two built-in NICs, a built-in GeForce4 MX with dual monitor support, USB 2.0, FireWire, PCI slots, and an AGP slot if you want to max out the video later with pixel & vertex shaders from Nvidia, ATI, Matrox, or 3D Labs. (OEM 64MB GeForce 3 cards are available for as low as $100 when Fry's is in the mood.) Choice is good.

If you're genuinely hard up for the cash to build a surprisingly kick-ass $600 PC are you really doing yourself any favors hacking an Xbox instead of getting a good used system and applying to acquiring skills that earn you decent enough living to buy the Xbox for games?

Some speak of developing games without an SDK or license from Microsoft. This is pretty silly on both fronts. Microsoft actively encourages aspiring game developers with free downloadable instruction for putting together an almost-Xbox PC to serve as a proof of concept platform. This way regular folks who can't commit the kind of money needed for an SDK can shop around their work and perhaps get funding. A rather more difficult task if your target platform is the PS2 or GameCube. (Yes, Sony has a Linux for PS2 package but it is purposely crippled in such a way as to greatly hamper game development, unless the game you have in mind is a text adventure.)

As for the latter, so what? We'll see a bunch of OSS games that have no commercial viability in today's market. Tux Racer, Doom, etc. Again, if you're that hard up for old PC games you need to focus on getting your job skills in order. As for new development of commercial quality games that exploit the Xbox capabilities, who in their right mind is going to invest the massive effort and not look for commercial distribution which in turn means pursuing a legitimate publishing deal. How many people are going to forego buying Halo because they can get free versions of games they played almost ten years ago?

A much bigger concern for Microsoft is people producing pirated DVDs of games that pass the security scheme. A small portion of the installed base will modify the machine to accept any disc but copies that work on any machine are much of a threat since Xbox owners could purchase pirate game without intention. It would be very hard for eBay to stop this if the packaging looks good. That part is child's play compared to getting the discs right.

The other big concern would be if someone works out a method for emulating the Xbox on a similarly equipped PC. Even if the emulator is designed to only play legitimate game discs it will soon be hacked to play copies, too. Since millions of PCs that would work well with such a product have already been sold with many thousand more every day there would be no cost worth mentioning to the user. With no cost or hassle factor to using pirate discs that would be the real threat to the business.

Xbox is a beautiful thing...goooey gaming goodness.