I think Xbox compatibility was achieved using an emulator; Wikipedia seems to suggest this is the case [1].

It seems like this would be an ideal opportunity for the QuickTransit [2] stuff Apple used in Rosetta to see some more use, assuming IBM would be willing to license it (and MS sees it as a worthwhile endeavour).

[1] : http://en.wikipedia.org/wiki/List_of_Xbox_games_compatible_w... [2] : http://en.wikipedia.org/wiki/QuickTransit