Recently my one friend, "hacked" his XBOX to allow it to become a Media Center computer. Through an exploit from Mech Assault for XBOX, he can run executable code from a Memory Card. Home brew developers created a easy to follow walkthrough to load OS-like software to the XBOX that turns it into a real easy to navigate Media Center. We can stream video, music, and photos from the computers on our LAN and download from the internet. I haven't seen lag affect the quality of the video at all, and we have DVD quality movies that we watch from it.
I don't remember the exact link to the website where he got all the software from and the walkthrough, but I'm sure if you Google "xbox media center" or "xbox home brew", you'll find it sooner or later.
I only have a PS2 and I was thinking about doing the same thing. Of course the PS2 doesn't have the processor power of XBOX, but it should be pretty fun to test out. I just need to grab a 200gig IDE hard drive for the expansion slot, something to hook PS2 memory cards up to my computer, and the network adapter which I already have.
If you are interested in turning your PS2 into something more than just a game console, then here's a link that will give you a good start.
http://ps2dev.org/
There are software packages that will basically turn your PS2 into a Linux-Like console. You'll have all the development languages, network capabilities, and everything else your geeky little heart desires.
