X-Box 360 for Home Theatre?

I am not a hard core "gamer" but I do find video games amusing from time to time and have several from an original X-Box.

Therefore, I was wondering if I could use the new X-Box 360 as a DVD player which would enable me to get rid of one device.

Does anyone know? Picture quality? Audio?

Thank you.
I use a 360 for casual gaming and have used it a few times for movies, it does have a great picture, audio is nothing short of pleasing with the digital toslink provided, I did not buy the remote so I just use the game control and it is easy to use. The only thing is fan noise may bother you during quiet parts of movies, I hear it sometimes but it never bugs me enough to worry about.
It has as good a picture as a Sony and the Samsung HD841 I compared it against, my dad gave me his Lexicon RT10 when he upgraded to Esoteric last week so when it gets here I will compare it with that player also.
It does work relatively well as an upscaling DVD player (though due to licensing restrictions it only upscales through the VGA cable, not through the component cables). Picture quality is definitely acceptible.

The picture quality when HD-DVD player add-on is excellent, though I don't really have anything to compare it to. The colors are lush and vibrant, and playback performance is zippy.

The problem with the 360 is that its one-size fits all approach leads to some pretty big compromises in terms of audio quality. All of the audio tracks get transcoded to Dolby Digital so that it can mix in the sound effects during playback. That means no DTS out of it, period - even with the HD-DVD player, where DTS 2496 is a big perk. Of course, it also lacks 5-channel discrete out (and HDMI) so you won't get to enjoy the lossless surround from HD-DVD... but that's less surprising than the DTS transcoding issue.

It's not a deal-breaker by any means - performance is still pretty good - but if DTS or lossless audio is important to you it's something you should be aware of.

If I didn't have cable and Netflix, the marketplace would be a really reasonable alternative. There's a lot of HD television and movie content. It's really well done.

All said, the compromises are all pretty reasonable and if component consolidation is important to you it's not a bad option at all.