I agree losing the set-top rental fee would be fantastic but I don't think an Xbox 360 would last the 2 years needed to have it pay for itself. I can't imagine running that piece of hardware as much as I run my cable box.
Also, this doesn't address whether or not the lowest price xbox will work for this kind of service. Will having additional hard drive space for buffering and the programming guide be necessary? I'd love to see some answers for stuff like that.