Before I got into web development I was chipping xbox's and playstation 2's. I had people sending me their consoles from all around the country. I was probably 16 at the time. Now, the people that are doing this are getting FBI searches. I read about this not to long ago. Kind of scary.
Why put a chip in an xbox? I've always found it easier to "hotswap" the HDD and never had an issue with it. Or are you talking about the 360 (which I've never modified).
I still do work like this for the locals but I'd never turn it into an online business. These days I mostly work on PSPs though....custom/hacked firmware is great.