This sounds like a great idea (for Microsoft), but in practice I just can't see this working. OK, so it would be really cool if HP/Gateway/Dell/etc made a media center / entertainment center PC that went in the living room that in addition to being an easy-to-use PVR (tivo) could *also* play xbox games. But... think about the ramifications of this.
First thing that came to mind was piracy. Every vendor would most likely have their own variations in hardware. If one of these gets hacked--just one--then it opens up the flood gates to xbox game piracy. I don't think MS wants this very much. :)
But.. Each of these "xbox media center" (that's a joke) PC's would have an internet connection. What if playing a game on your xbox required some kind of digital signature exchange with a central MS server? Hmm.. that would solve the piracy problem right quick, if done correctly.
Hmm.. so many things to think about this weekend.. :)