I soft-modded an xbox recently, installed XBMC and it literally blows all the other media players I've tried out of the water. The one thing it *doesn't* do well is High Definition - the xbox 1 just isn't powerful enough to play these reliably. But softmodding is cheap and relatively easy now if most of your video needs are standard definition. I even got brave enough to upgrade the hard drive in my xbox to a cheap 120 GB just this past weekend! I had never opened up the box before this.
I used Krayzie's NDure installer to apply the softmod. I cannot post a link to it here because I think it might violate forum rules, but if you search, you'll be able to find it. A new version of the installer just came out a few days ago. It is VERY noob-friendly and guides you through the whole process of the softmod. If you go to www.xbox-scene.com
, you'll see a lot of discussion about it in the forums.
In addition to the installer, I needed a copy of the original version of MechAssault (which I got used from a local Gamestop) and an Action Replay MAX gave saves/memory card pack.
Once you've softmodded the box, you'll want to establish network connectivity between the xbox and your PC so you can FTP apps/files to the xbox. One of the first apps you'll want to put there is none other than XBMC.
READ, READ, READ! There is a lot of information out there and many guides that will help you set up FTP, XBMC, and network shares so you can use SMB to stream videos, pictures, and music to your xbox. There is a wiki on the XBMC site that serves as a manual, and you can get a lot more information from other sites like xbox-scene. I am learning every day and still consider myself a noob. I won't tell you that it's incredibly easy to set up, but I will tell you that the effort is absolutely worth it. If you don't have patience, or don't like to tinker a bit, XBMC is likely not for you, or you may want to ask a friend to set it up for you.
XBMC has many features and it is being updated almost daily. Take the time to read the documentation, because it is very customizable and you have a lot of power to tweak it as you like. You can install scripts contributed by the community that can stream video and music from over the web, read RSS feeds, and much, much more.
Finally, as wonderful as XBMC is, don't forget that another very popular use for a modded xbox is to run emulators for other game systems, many of which are no longer in production, like the Super Nintendo and the Sega Genesis. The MAME arcade emulator is available for the xbox as well. Depending on your age, it might take you back to warm and fuzzy memories of your childhood.