If I am in charge of the fate of any Xbox, I recommend hacking it. See a page of If and How to hack an Xbox for more information. Also check out What one can do with a hacked Xbox.

If

You may want to first figure out why you want to hack an Xbox, and keep this goal in mind so you have a clear incentive on while to continue, or discontinue, spending the effort.

I recommend hacking every Xbox, if for no other reason than so you can back up these:

Data on hard drive
  • Easily back up saved games, without the memory limitations of a memory unit or limitations on if a game designer wants things copiable to a memory unit and given to friends
  • Custom Sound Tracks
  • Any other data, such as DOA3 costumes
Hard Drive Key
Useful for replacing a hard drive.
  • Some people like to have a larger hard drive in their Xbox than the 8GB or 10GB drive that is included.
  • If an Xbox hard drive fails, due to manufacturing error, old age, or simply rough handling (dropping the Xbox), then it can be replaced. Hard drives tend to be more mechanical than other eletronic components in a system, and can be the most likely thing to go bad.
In order to replace a hard drive, you must either change the BIOS in your Xbox or you must get the hard drive key from your existing hard drive BEFORE you develop a problem with the hard drive. Waiting until a problem occurs may result in unfixability.
EEPROM
Hackers are strongly advised to back this up, in case something goes wrong. I haven't really studied why, but even if there isn't currently a plan to make changes to an Xbox, a failed hard drive could change that and then hacking may be more desirable. Maybe there are even other reasons that an average Xbox user could benefit from having an EEPROM backed up.
How
Let me list the *disadvantages* to different hacking methods.
None - No Hacking
  • Neat stuff can be enjoyed on a hacked Xbox
  • Hard drive failure would be harder to work around
Mod-Chip
  • Costs money (mod-chip users seem to generally feel their money was well spent), and then one must wait for mod chip to arrive
  • Requires opening Xbox (breaking stickers that service to seal Xbox, and so voids warranty)
  • May require soldering
    • Requires soldering equipment, and know-how
    • This is basically "electronic surgery". An error can damage an Xbox
    Although installation may be more difficult, once installed, people often feel their mod-chips have made for an easier hacking experience.
  • Can cause a person to get banned from "Xbox Live!", especially since using a mod chip can make using hacks easier than some soft modding techniques (especially older soft modding techniques), and so mod chip users have been forgetful or otherwise careless about a hack being used leading to Microsoft detecting their hack and banning them from "Xbox Live!" (This should be avoidable by being careful)
Soft Modding
  • Requires a way to write to the Xbox hard drive. This process could be dangerous to equipment, or have some financial cost and wait involved, depending on how this issue is approached.
  • The safest methods involve using a saved game exploit, requiring the posession of a commercial game that can be exploited. (This may cost some money)
  • Recovery from software-type errors can be more difficult than using a mod-chip
  • Software hacks tend to have disadvantages. Choose from one or more of:
    • Hack may "break", causing one of:
      • Xbox won't boot at all
      • Xbox won't run unsigned code until a saved game exploit is again used.
    • Riskier installation process (easier to cause error during installation that fixing could prove to be difficult or even impossible without using external equipment)
    • Some loss in ability to use custom soundtracks. An audio CD may be necessary (not likely)
    • Several buttons may be required to initiate hack