DEFINITELY keep that Xbox. I'm not sure the 360 has enough next-gen games out that make it worth it. The only thing I see in it is being able to play Xbox titles in HD possibly with AA.
The fact that its modded or being modded is a huge reason to keep it.
Trust me, you'll want it as a killer game machine (considering you got 4 controllers... sports games and party games like Fuzion Frenzy are a blast on drinking nights) and as a cheap HTPC. My roommate has a modded Xbox and its pretty much the center of entertainment. Yeah we got PCs that we game on but if we are all downstairs in the living room, his modded Xbox has tons of games, streams video, pictures, and music from all of our PCs.
For how cheap they are, Xbox is still an awesome machine. There's still good games coming out for it too. I'd move in with the modded Xbox and see how all of your roommates like it, then decide if you want a 360.
edit: And yeah nearly all games support 480p so at least it won't looked strethced on your LCD TV since it will be 720x480 (won't look that great, but from normal viewing distance you won't notice pixelation much). And I forgot to agree that the emulators are a huge reason for having the modded Xbox too. Now I go to a technical school so theres lots of CS geeks, but pretty much anyone can't deny how awesome a modded Xbox is. There's something for everyone (Xbox games, thousands of classic games via emulators, DVD playback w/ retarded MS kit, divx/xvid/any video format playback, mp3 playback, FTP server, etc x100)
Finally, theeres wireless controllers for the Xbox anyway. I don't see the hype. Whenever I play over at my buddies Xbox w/ Live, he always hands me his Logitech wireless. I swear its not as responsive in Halo 2 or Far Cry as the wired. And even if it was perfect as a wired one (some brands may be), I don't notice ANY advantage at all while I'm using the wireless one. It's like there could be a wire there anyway and I wouldn't have a preference either way.