Yes, you have to use a serial connection for THIS EXAMPLE. This does NOT mean you ALWAYS have to use a serial connection. The maker of this fine example just wnats to test some more code, and instead of burning a DVD+R DL for EVERY CHANGE OF CODE he just burned ONE - with a serial loader! So he can play around as much as he wants without rapid growing of costs.
Now IF someone puts a complete app together, it could be packed on a patched KK disc, where only video segment, security sector, the first few files loaded by KK and the patched shader remain. The rest can be left out to make space for our precious new homebrew. No need for serial! Or the shader can be made to load code from the Ethernet port, the original X360 HDD or even a USB HDD! Only thing for now is: You have to put the patched KK (or whatever game will be used in the future, but I guess KK will be the defacto standard) disc to start any kind of homebrew. I hope that can be changed somewhere in the future....
What does this mean? It means you can start to work on all the homebrew we ever wanted for the X360! Now that we have a foot in the door, there will be no way back.
For all you Live-addicted people out there: Come on, a Core pack isn't THAT expensive. You can clone your premium HDD to a cheap WD 2,5" drive. Since you won't go live with one of dem X360s, there won't be problem....
About the emulation of 'last gen' consoles:
XBox1 doesn't need to be emulated, as it already is.
GC should be no problem at all, look where the CPU and the graphics are coming from. Now the question is, if there is THAT much emulation to be done at all...
Same goes for the Wii: Hardest thing here is how to make the games controllable....
PS2: THAT is probably a tough one.... I think there is a reason why Sony put in a whole PS2 inside the PS3 and didn't want to do a software emulation....
Dreamcast: Probably harder than GC and Wii, but doable, me thinks
Saturn: As far as I'm informed, an original XBox could almost run a Saturn emulator at 80% (or so), so it should be no real problem on the X360
All older systems already run pretty fine on original XBox (with some restrictions because of only 64MB RAM)