I think it's time to try to revive the free60/libxenon legal homebrew scene :) [note x-s: libxenon is a library for writing programs for the Xbox 360 with XeLL, without using any existing code as a basis]
I have submitted patches to libxenon [note x-s: see here] to try to make it more usable, it's still far from perfect but you can already do some stuff with it.
As a 'proof' of that, here's a preview vid of a Nintendo 64 emulator that uses libxenon:
It uses a dynamic recompiler emulation core, gfx rendering is HW accelerated and uses pixels shaders, and of course the 360 CPU runs full speed.
It's still buggy, but as you can see it's quite fast, I have yet to do some multicore optimisations to try to make it even faster.
Now if anybody is interested in writing libxenon homebrew, I can try to help (I'm usually on #free60 on the OFTC IRC network).