Firmware is not as easily upgraded as potatosalad would lead you to believe. Yes if the firmware is actually released by the manufacturer, running a firmware update is easy. However, making your own firmware to compensate for differences in X-Box hardware versus PC hardware is way more difficult (and yes some of the differences are in hardware, my biggest example being the method the DVD-ROM uses to read the disc, that is a hardware feature that is implemented on a chip). Emulating the X-Box obviously is not as easy as you made it sound originally potatosalad. It isn't simply a matter of running the games under Windows. It is much more complicated than that. Thats the only point I would like to make. Alot of people seem to think the X-Box will be emulated in a matter of months, while I argue that it will take years to get an emulator that can actually play X-Box games. Additionally, all kernels are not created equally. Just because the X-Box OS is based off of the Windows 2000 or NT kernel does *not* in fact mean that the kernels are compatible or could easily be compatible. The kernel is simply the very very basic operations of the OS. And being based off of a kernel could very well mean that the codebase started out from the same source. There are hundreds of UNIX variants out there, many of which are based on the same original kernel, AT&T's Unix System V. That doesn't mean that all of the kernel versions are compatible or even that they could easily be compatible. So simply stating that the kernels are both NT based does not suddenly mean they are interchangable and code that will run on one would run on the other, or would easily run on the other with slight modifications.
Your statement that the X-Box is an IBM Personal Computer is also not true. It simply is not true because the X-Box is not a Personal computer. It cannot run any applications other than games. A personal computer by definition can do things like word processing. Hardware wise, it is architecturally similar to a PC, and probably more similar to a PC than any other console around, and while its true that the X-Box will probably be hacked like crazy just like the Dreamcast I do not believe it will be so easy to emulate it just because it shares hardware with a PC. If you consider the Dreamcast to be an original design, simply because the motherboard was specifically designed to fit inside the Dreamcast case, and the OS is custom fit to run Dreamcast games then the X-Box is an original design as well. The Dreamcast uses an off the shelf CPU, an off the shelf Yamaha CD-ROM with proprietary firmware, an off the shelf Yamaha sound processor, an off the shelf Video Card ... The X-Box uses all of the same. The only possible difference is that the X-Box uses pre-determined standards to connect all of the components many of which are built upon designs which are superior to anything else out there (HyperTransport is one, Nvidia's cross-banked memory architecture is another).
As for your statement about CloneCD being able to read X-Box DVDs, good luck. If the TOC is on the other side of the disc, and the DVD-ROM is looking for the TOC in the inside of the disc, it won't ever find anything. If the DVD-ROM itself can't find the data, how do you expect a piece of software to be able to find it?