I'm a big fan of doing hardmods. You can put a fresh drive in it, boot off a Slayers disk, and format the thing without having to mess with hot swaps and copying files over. The first step is to find out what version of xBox you have. If you have a 1.6, I'd look for another xbox. The soldering on the bottom can be a big pain on a 1.6 unless you know what you are doing.
As far as the quality of chips goes, I've had good luck with the DuoX2 and the Aladdin XT when it comes to cheapo chips. The Duo is a bit nicer as it has two memory banks and enough space to hold a VGA modded bios if you want to go that route. Paypal really cracked down on sites selling modchips so they aren't too easy to find. DealsExtreme used to have the Aladdin XT for ~$5 before they purged their site of mods to keep paypal.

Don't spend $25+ on a chip unless it is Xecuter. If you want to pay for quality, go with Xecuter. I also recommend looking up TSOP flashing. This is enabling flashing of the stock xBox memory with an alternative bios. I've done this a few times just to see how difficult it was. You have to do a softmod first and jump through a few hoops but the results are mostly the same as having a chip.
If you run into trouble, send me a PM, I'm happy to help.
Other stuff to think about:
- Vision is cooler than coinops at this point and is put together by the same guy, BP. I'm a mod at the coinops forum so I'm pretty well versed in them both.
- I work with Degenatrons and Bootsector on the KADE encoder and I think it is the best controls encoder for xBox 1 + Coinops/ Vision. I'm not biased at all.