come on people!!! Give me a break with the "I want to back my games up, really", or "my kids are going to break the discs and I want to have a backup"....
If you are letting your small children load $50 DVD/game discs into a $300 system, then that is your fault. Are you saying you should also be able to make a backup DVD for all the movies you own, or is that not needed because DVD's are only $16 each? If the kids are old enough to use the system on their own, then they are old enough to be shown how to properly do it, period.
Once "backup" methods exist, then of course they would be used to feed all the warez kiddies...have you seen how many posts there are on the dreamcast newsgroups? No wonder this system didn't last (which is too bad because it had some great titles). PS2 titles are now starting to appear, but PS2 sales are well ahead of the DC's.
I wouldn't anticipate we will see any type of X-box game copies for at least another year, but it will probably happen sooner or later.
As for X-box emulators, the graphics processor in the X-box has two pixel shader units, whereas PC Geforce 3 cards (all) only have one...other than that, theoretically it could be done. Again though, I wouldn't look for those within a year, and I wouldn't want to fight MS in court either!