The XBox Linux Project team seem to have raised a great deal of interest in the programmer communities of Europe and the US. The next step in the informal yet, as its members argue, completely legal, linux infestation of the console has already been taken. A pre-alpha version of a replacement for the console's system software has been released and its source is available from the Project site.
The Basic Input Output System (BIOS) software it is hoped will eventually turn the XBox into a Linux workstation. The current release initializes all PCI peripherals and performs the PIC watchdog challenge, so that full and stable control of the machine is gained.
The basic rule for any programmers efforts being accepted is that no Microsoft development tools or inside information may be used. This is most likely done in order to avoid any legal complications as, it is almost certain, MS legal teams must be going through the Linux efforts with an extra-fine tooth comb.
It is unlikely that Microsoft will produce a linux version of the XBox, as Sony did for the PS2, since its Windows software is in direct competition with that OS.
Some of the interest generated by the project is almost certainly due to an anonymous grant of USD 200,000 received by the Project in order to fund programmer's efforts. Who actually offered the money is not known but all those rumours of Sony being behind it are pure speculation.