I have built quite a few modded Xboxes. I use the Duo X 2 chip. Its simple, but does the things I need it to do. I've never messed with Linux on the Xbox. The Xbox can do a lot of things very well, run emulators for most of the old game systems, run burned copies of Xbox games, store Xbox games on the hard drive for faster loading and disk-less operation, and even emulate MAME. It can be used like a jukebox by using XBMC. But using it to surf the net, in my opinion, is a waste of time. Most modern computers are much faster and do the same job much better.
Soft modding is OK, but its much harder to upgrade to bigger hard drive and its not nearly as durable as using a mod chip. Installing a Duo X 2 takes pretty good soldering skills. I originally used my modded Xboxes for running Halo LANs at my house, but in the last 9 years or so, I have built a bunch of them for friends. It really nice to have all of the Atari 2600, 7800, 400/800, Intellivision, Colecovision, Sega Genesis, NES, SNES, and MAME games in one place.