i have done soft mods, but the problem is, upgrading the hard drive is much more difficult, and if your dvd drive is crap, then it is essentially worthless. if you install a chip, you can easily upgrade the hard drive, and then it doesnt matter if your dvd drive doesnt work, cause you dont need to ever use it again.
installing a chip isnt that hard at all, even on a 1.6...it is a little more work, but still pretty easy.
if you are thinking about picking one up, i'd do it soon...they don't make these things anymore, and at that price, i don't think they will last long.
the guys at my gamestop were very helpful. they sell them in a clear plastic shell. when i asked for one, i asked for an old one if they had them..he looked through them and found me one that was from Jan of 03, which means it should be an easy one. if i remember correctly, anything manufactured after March of 04 is a 1.6.
i booted it up as soon as i got home and it played a game with no problems. even if the dvd drive is no good though, i still have two other modded xboxes, plus a spare drive lying around, so i can always swap it out temporarily if i had to.
i'll probably order a chip this week one day, but i need to finish my Christmas shopping first, to make sure i have the cash to get it.