Maybe I am being simplistic, but the new dashboard features seem much more important and relevant to everyday use than the new generation of modchips?
I don't need 2megs of flash ram when I use a single 256k BIOS, but the ability to ftp serve, mp3 rip, irc client, etc etc are ways to extend the functionality of the Xbox in ways that are so exciting and so in advance of any "games" machine.
Roll on the dashboard wars!