I totally agree with this, except about swapping the hard drive. You can get away by just having a NAS or a shared PC on the network.
You cant run emualtors/games etc; from a NAS or network share. HD swapping is a must in my humble. IDE HD's are so cheap now and lets face it unless you got a mad one to install every xbox game on your HD you dont need more than 120gigs in there.
The best way I have found is to hack a Xbox controller and put a standard USB plug on, and buy a memory card to go into it, from there Action Replay will be able to transer the image over.
Making a USB adaptor is really easy. I dont know what its like in the states but here in the UK you can pick up an XBOX USB adaptor for a lot less than you can pick up a second controller to hack. Be aware though not all flash memory will work with the XBOX over USB.
EvoX is good but Avalaunch has some great tools available for it like Qwix.
Qwix will work with any XBOX dash including evox and XBMC. Avalaunch gives it extra functionality but it isnt really applicable unless your transfering large amounts of games to your XBOX.
Lastly make sure you have a good quality component cable for you HTXbox. XBMC at 1080i is an absolutely amazing experience. XBMC also upscales all your video and DVD's to 1080i way better than the crappy upscaling DVD player I bought!!
My £0.02
Your tuppence was well spent.

There are issues with USB memory sticks and the xbox. Just hack a controller and those issues goes away, and there is a nice side effect, as you can then use the controller with the PC.
I mean we can just reinvent the wheel for this guy and let him make all the mistakes, but to what end? Hack the controller transfer the save game via action replay load the disc and install AID. Done.
The NAS option is exactly that an option, and if you like waiting for ages for the app, game ot movie to transfer via FTP well thats just fine. Its not just straight forward to up the hard drive like it is with a chipped xbox, and there is plenty of room for failure.
Just for the record, I had a full romset on Mamedox, Full set of Daphne on DVD and all the console games with XBMC on 8gb. Its do-able, but so is upgrading to a 500gb drive.

Just my threpence.