Xbmc doesn't really need to run on 360.
On that front, XBMC already runs on PowerPC[1]. It also already has some flavor of Direct3D bindings, since the original Xbox used D3D 8. No idea whether PPC/D3D 9 would be hard or not.
This differs from the original Xbox where most of the "homebrew" was written for the Windows derived OS and ran under it, thus could take advantage of all it's features.
:(
Didn't play WaW, so I can't speak to that one.
This is definitely a good step forward though. At this rate by the time the 360 is retired from the marketplace we'll have a reliable boot method that allows everyone to turn their old 360s into media servers/toasters/whatever.