You can run anything on dsl that you can run on anything else. You being a linux user already should make the task easier. I would suggest you stick with dsl because it is already slimmed down to nothing. Then build that distro how you want it.
This will also tighten up your linux skills because you don't have all the handy gui based tools of the newer pc distros. You have to build all the handy tools.
The only problems you will have building you will have with all distros. You have to be careful with packages that upgrade x between sarge and etch. You can apt-get -f dist-upgrade threw sarge but there is alot of stuff in etch that will bust your distro. You can still get all the newer python,java,perl and other useful tools to build the newer apps out of etch.
Use these repos for sarge
deb
http://archive.debian.org/debian sarge main contrib non-free
deb
http://archive.debia...g/debian-non-US oldstable/non-US main contrib non-free
deb-src
http://archive.debia...g/debian-non-US oldstable/non-US main contrib non-free
deb
http://archive.debia...debian-security sarge/updates main contrib non-free
deb-src
http://archive.debia...debian-security sarge/updates main contrib non-free
the etch repos are easy to find if you can't find them let me know and I will give you the ones I use.
Do this with a fresh build I don't know the outcome if you have used the woody repos first.
After you enable apt-get open the emelfm as root then navigate to /etc/apt then open sources.list up with beaver and make sure that all the lines listed have a # sign in front of them. This will comment out the old lines. Then paste in the lines I copied earlier in the post. You will repeat this process when you move to the etch repos.
It might not apt-get -f dist-upgrade first try. You might need to apt-get -f upgrade a time or two and apt-get -f dist-upgrade again. Then go to the etch and get yourself python2.5,perl, and java. And anything else you might need to build newer apps. You can add from there anything that does not mess with x. Then change repos back to sarge. Then apt-get install synaptic with the sarge repos. "synaptic from etch will break your build this app has to come from sarge repos." Now you should have a gui based newer package manager. And now you can switch repos with a gui interface easy. You can now use any of the repos to build from but you can only use the same distro at a time to build from. I would also recommend that you build konquer from sarge. This gives you a good file manager/web browser that has a nautilus like feel.
Any app you want to launch on boot add the command to start it up in /opt/bootlocal.sh "this is because the fstab gets rebuilt every startup which makes if different from other linux builds"
If you need a 2.6 kernel you can get it here
http://www.aelius.com/njh/xbox-linux/Get the headers too.
Just cd to the directory you downloaded them in with the terminal then issue this command to install the packages.
dpkg -i packagename.deb
Once installed a couple more tweaks are nessacary. From that site listed it has a list of modules you need to copy the modules off of that and paste them in /etc/modules you need to do this because of a change in modules with things like the keyboard and mouse. You can leave the old modules on that file the kernels ignore the modules they dont use. You may see a warning on boot up but dont sweat it it is not hurting anything. This way you can still boot from both kernels. You also need to tweak /boot/linuxboot.cfg on native installs or the linuxboot.cfg located in the root of the E drive on a loopback install."I dont know how to launch from the 2.6 on a loopback install I can install it but I dont know how to launch it"
You should put
title 2.4.31
kernel boot/linux24
append root=/dev/hda2 init=/etc/init ro video=xbox:800x640:hoc=0,voc=0 quiet kbd-reset
title 2.6.18
kernel boot/vmlinuz-2.6.18-xbox
append root=/dev/hda2 init=/etc/init kbd-reset xbox=hdd
xboxfb y
your 2.4 might look a little different than mine you can use the one already listed. The 2.6 can also look like this
title 2.6.18
kernel boot/vmlinuz-2.6.18-xbox
append root=/dev/hda2 initrd=initrd kbd-reset xbox=hdd
xboxfb y
This will present you a grub like menu at boot and you can pick the kernel you want to launch. If you want to auto launch a kernel and bypass the menu you can add default "kernel title" like this
title 2.4.31
kernel boot/linux24
append root=/dev/hda2 init=/etc/init ro video=xbox:800x640:hoc=0,voc=0 quiet kbd-reset
title 2.6.18
kernel boot/vmlinuz-2.6.18-xbox
append root=/dev/hda2 init=/etc/init kbd-reset xbox=hdd
xboxfb y
default 2.6.18
Hope this helps.