The standard Xbox is seriously crippled as a PC. The main problem is the lack of memory. 64M is really not enough to run a full modern Linux distribution. Upgrades to 128M are expensive and require surface mount soldering. Add to that the lack of expansion capability, and the current state of the Linux ports to the Xbox and it's not a real good deal.
My advise would be to keep the Xbox for games, and get a cheap SFF PC for runing Linux.
BTW, most consoles are sold below cost. Even the PS was like that. The makers make most of their money on licensing software.