Agreed with sliderider on checking if they're banned on Live. AFAIK it has no impact on single player (just like VAC), but would affect multi-player gaming and potentially other Live services (I don't remember if you can still access basic XBL services like updates on a banned system). Chipped/modded consoles are also often banned because the chipping usually is done to enable pirated software or other hacks to run, which is ofc all illegal. As far as benign/legal mods, XBMC (Kodi) started out as Xbox Media Center on the original Xbox, and is a neat application if you can live with its limitations (from what I remember of playing with one, it makes the Xbox fairly similar to the PSX (the actual PSX, not PS1)). There's also various linux-on-xbox mods that've been tried over the years. If I remember correctly the original Xbox can also have RGB output added fairly easily.
On Xbox360 modding, Lian-Li actually released an after-market aluminum case for the Xbox360, and iirc watercooling parts were also made (I think Koolance). It can get pretty elaborate. Xbox360 can also support HD-DVD playback with the attachment (they're usually super cheap, and yes they work on Windows too - Windows Update will automatically get drivers for them), and HD-DVDs tend to be dirt cheap even brand new, so that may be a consideration too (there's a lot of movies on HD-DVD, and in some cases its cheaper than DVD even, and Xbox360 is one of the few HD-DVD players that will do 1080p). It will also support, of course, a wide range of games including many new titles, and can be a nice augment to a gaming PC (especially if your gaming PC is a little dated and you don't want to upgrade for just one or two games)). The Xbox360 will also support tons of streaming/multimedia stuff like Netflix, Amazon VOD, etc too (I don't know if this stuff is affected by a Live ban though), which may also be worthwhile.
Overall, I'd probably be more inclined to use an Xbox360 has a "media center" than an Xbox, even with XBMC, because it will handle HD content, can optionally play HD-DVD, will integrate fairly well with Windows Media Center/Windows Media Player for network streaming, and has lots of online streaming options. Let the original Xbox run games and be happy.
On the PS1, I'd probably only keep it around if you specifically want to play PS1 games and don't have a PS2. There's some neat exclusives for PS1, but remember that PS2 can run PS1 games without trouble, and has more flexible output/connectivity options. If you have one of the so-called "audiophile playstations" (SPCH-1001; the one with the RCA output jacks on the back) they can fetch a decent price on ebay (like $30-$40; used to be higher but everyone and their grandmother went out and dug up every last SPCH-1001 and milked it). As far as whether or not they sound like the gods, I'll leave that up to you. (If you have no idea what "audiophile playstation" is, here's the original article that created the "$6000" myth: http://www.6moons.com/audioreviews/leben2/system.html and more coverage elsewhere: http://musicalmusings.themindofgame.com/2010/ … iophiles-dream/).
