The 360 has 10mb of embedded ram used only for specialized tasks (like AA). Any general graphics processing will make use of the shared 512MB not the 10MB
Lets assume for a moment that MS did infact release a version of XP or Vista that could run on the 360... That would take care of the processor side, I should HOPE that the same company that designed the hardware would be able to optimize their software to run on it.
As for the ram... 512MB (even shared) is plenty of GENERAL COMPUTING TASKS
Web Browsing
Instant Messaging
Media (music, videos, DVDs, etc)
Simple Photo or Sound Editing/Scanning/Printing
File sharing (P2P, FTP, etc)
Ripping and Burning
Yes you could even play quite a bit of games and even do Solid Modeling with that "little" amount of ram.
I ran 512MB on my old AMD 2600 XP with a 64MB GForce 2 with WinXP
I was able to run UT 2004 at a decent resolution, I was also able to run a slew of solid modeling applications such as Solidworks, Rhino3D, Cinema4D, etc.
Not only that I was able to run all of those things on my IBM T20 Laptop... a P3 733Mhz with 256MB ram and a S3 Savage 8MB video processor.... granted it didn't perform anywhere near comparable to a high-end Desktop but I still ran them, and comfortably.
But that's all assumption... Windows XP or Vista don't run on the 360 and probably never will... the argument is pointless and holds no factual information... it's all just speculation.
Heck Windows is not even optimized for multi core and even if it was open source I don't see anyone optimizing it in the near future... why even talk about running windows on the 360 it will never happen: PERIOD.