Productwiki.com has put together an amazing guide about how to turn your Xbox into an Xbox Media Center.
It absolutely blows every other guide I've seen so far out of the water. I wish I had something like this when I was in the process of modding my first Xbox.
I'm not really going to summarize it too much, but I highly recommend checking it out. The method that productwiki demonstrates is probably the simplest method for modding the Xbox, although there are a number of other methods.