You could, however, get any separate widescreen LCD and use it with the Xbox 360 as long as you get the Xbox 360 VGA cable. I have one and it worked really well (at least until I got my 32" TV!!!!!). The only issue there is you need to get a couple adapters for your audio.
But yeah, a 20" LCD should only cost you about $200. A 24" will run $300-$350. And you can also use it as a secondary monitor for your iMac. DVI input for the computer, VGA input for the Xbox.
For audio, you will need to get an adapter that has two female RCA jacks on one end and a male 3.5mm headphone plug on the other, and then you'll have to get a 3.5mm headphone gender changer (3.5mm female headphone jack on each end). Plug headphones or speakers into that and you're set.