The 20KB stripped down Windows kernel that shipped on the XBox isn't hard to emulate...emulators such as CXBX do this for many functions by calling the respective windows function on the host. Low-level emulators (XQemu) take the opposite approach by emulating well understood hardware (hdd, cdrom, usb) and then running a binary dump of the xbox firmware (which contains the kernel, it's not on disk) directly.

To my understanding the hardest problem in XBox emulation is the GPU, and unfortunately this doesn't help with that.