Still codes up games faster than an any i5 setup money can buy or even Core2Duo 64bit so for pushing a mouse pointer around a screen full of icons it's fine IMO. If the 360 can stream video and run IE 9 it is good enough to run OS4 on for sure, hardly a cutting edge OS any more.
Yes, it can run games faster than a Core2Duo, because that's what it's
designed for. Equally, a Core2Duo running an OS would run rings round the Xenon, because that's what it in turn is designed for.
Console CPUs are designed for two things only - Gaming and Video. Yes, they can run other stuff, but as anyone who ran Linux on a PS3 will say, you don't get anywhere near the speed you'd get with a similarly clocked desktop processor.
If it was possible to run a Xenon instead of a very expensive PA6T, I'm fairly sure they'd have taken it. They're not stupid, and they're not a charity trying to lose money either.