I bought an Xbox (the old kind) about a year ago. Until very recently, I was playing with the Xbox connected to a standard-definition TV used solely for the Xbox, using the composite video cable that came with the Xbox.
I've got a year's worth of thoughts to write up about my experiences with the Xbox, but still haven't found the time. For now, I just want to recommend that anyone reading who has a console (a) gets surround sound and (b) gets a better video cable.
I'd been frustrated for some time by games where characters would shout warnings or advice without telling me where to look. So no game I've played says anything like "bad guy at 4 o'clock"; it's just "watch out!". This contrasts with the "hit indicators" in first-person shooter games, where each time you take a hit, a marker shows which direction it came from. The presence of this marker, in fact, was one reason why I assumed that consoles made no particular use of surround sound.
I was wrong.
Although I held off buying surround sound because no-one I knew had been able to tell me whether it was worth the bother, it turns out that it's like getting a whole new console. Even the last-generation consoles like my Xbox will make excellent use of decent sound hardware, and you definitely want something better than the rubbish you get built-in to a TV.
The Danny Elfman score to Fable now sounds like a Danny Elfman score, and sounds like it's being played by a real orchestra. You can hear all the different parts. I realize this might sound obvious, but to someone like me whose friends and family always just used TV speakers, it's not obvious that TVs or consoles can do this. I never realized that the quality bottleneck was quite so close to my ears.
In my current favorite game, Urban Chaos: Riot Response, you can hear flies buzzing, taps dripping, and tell which direction you're being shot at from. This, obviously, makes a big difference.
The flies, interestingly, were already visible in the game, but I'd never seen them before I could hear them. Which brings me on to another point: get a better video cable. I've always been vaguely amused by people who'll pay USD 300 for a cable. And I'm still not suggesting that. But a USD 5.99 s-video cable has made a visible difference to my Xbox's quality. It's not turned it into an Xbox 360, but it does mean, for example, that in Urban Chaos I can read more on the walls than I could before, I can read the manufacturer's name on all the door controls, and I can see that the health bar actually has thin black lines dividing it into sections that were invisible with the cable that came with the Xbox.
To use the surround sound system, I needed to buy an "Xbox Advanced AV pack". These are no longer easy to come by. Especially not on the day Nintendo's Wii launched, and security guards were holding back the crowds outside most of the local game stores. In retrospect, I should have made a greater effort on the Saturday I bought the speakers, rather than thinking "I'll get the cables tomorrow". Anyway, I finally got a used adapter from a local-ish GameSpot. After that, I needed to buy a Toslink cable for the audio signal and an s-video cable for the video signal.
(It looks like Logitech sells a converter from the standard stereo RCA connectors to the three mini-jacks that PC surround sound often uses. I've no idea how they compare to the Toslink optical cables. The disadvantage to the Logitech converter is that it wouldn't have forced me to switch to s-video, so I wouldn't have got the graphics upgrade, which was well worth it and another thing I'd have done long ago if I'd realized. In my opinion, Microsoft shouldn't have said "Advanced AV Pack"; that gave me the impression they were selling snake-oil USD 300 cables rather than something reasonably-priced that makes a visible/audible difference.)
I also needed to specifically tell the Xbox (on the weird green menu system that I only usually see between ejecting a game and turning the console off) that it should use "Dolby Surround" rather than stereo. Until that point, the Logitech Z-5450 was using the stereo signal to generate some kind of pseudo-surround sound. It was way better than what I'd been used to, but not as good as the real thing.
The nice thing about the Z-5450 is that the rear speakers are wireless. So you don't need to worry about getting cabling to them (assuming you have plenty of power behind the sofa, as I do). If I had my time again, I'd not unwrap the whole length of the speaker cables; my speakers are pretty close to each other, to the TV, and to the control box, and the space behind all that is now awash with speaker cable for no good reason. And I'm too lazy to collect it back up.
The little control box gets very hot, and the blue LED in the power button is a bit brighter than necessary. If you turn it off, the power button glows red; that's even more annoying. But at least it stays cool when it's off.
Another annoyance is that there's another bloody remote control, which is just what I don't need. For a man who has one TV, one console, and only ever uses the TV for the console, it's pretty stupid that I have three remotes. All I want is for the eject button on the Xbox (which turns the console on if it isn't already) to also power on the TV and the speakers, and for the power button on the Xbox to turn everything off.
My only other minor complaint is that I'd have liked all-black speakers. There are little silvery rims to the Z-5450 speakers that I don't really like. (Some of Logitech's other speaker systems are all-black, but they don't have wireless rear speakers, and that was more important to me.)
So, if you're wondering whether surround sound is worth getting: yes, it is. If you're wondering whether it's worth upgrading from composite video to s-video (or, presumably, component video): yes, it is.
Go forth and consume!