Its not that hard. I am running XP on my xbox through Qemu through linux and if you take the time to turn off all the services which xbox doesn't need, strip down features by disabling them in the control panel and then editing them out of system ini's and deleting the files, then a few other boot process modifications to optimize it to run in a qemu environment, and it actually runs quite nicely, even with WMP 9. There's already a tutorial up on how to get 98 running smoothely, just follow that and I reccomend Magellas Winboost to help your optimization process (http://www.winboost.com/) Just make sure you run PC qemu to set it up first, installing and optimizing on xbox would be hell. So set it up before you transfer.
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Windows XP can actually use ethernet too, given xdsl is set up for networking.