The install.txt file is used by default.xbe to copy/uncompress files to the cache drive. It is not used by hl2_xbox.xbe. default.xbe does not check the file size of any files, it merely processes each line of install.txt. After you've started the game and the cache has been built, you can quit and manually copy the uncompressed xzp files from the cache drive back to the launch drive (F:\Games\Half Life 2\hl2\hl2x\... or whatever.) Then, edit install.txt to copy the those uncompressed files to the cache - if it needs to. Just change the source file names from xbox_zip0.xz_ to xbox_zip0.zxp. It will simple copy them to the cache drive. So, you can put your modded xzp files on F:\Games\...whatever and use them to build the cache if needed.
install.txt will copy any files, not just game files, btw.
A nice shortcut to start the game is to simply run hl2_xbox.xbe instead of default.xbe. This skips the videos/logos alltogether and goes straight to the start menu. default.xbe processes install.txt and builds the cache in addition to playing all the startup videos. Configure your dash to launch hl2_xbox.xbe as well as default.xbe if it's needed again. If the cache is missing, xbox_hl2.xbe will stall since it assumes that the xzp files are already in place.