You'll need a mod chip if you want to do anything really useful with your xbox besides playing games. Most modchips these days have an on/off switch, so you can turn them off for xbox live play, then back on when you want to use the extra software etc you install.
Once you mod your box you can add a bigger drive (you dont have to though) and install a new dash (you still keep your old one, when the mod chip is turned off, it will goto your original dash - just like you dont have a chip at all).
Many of these dashes have ftp servers running in the background, so you can simply connect via transit, fetch or another ftp program and upload files.
As for the things you can do, there are a lot of possibilities. My xbox connects directly to my 17" PB, which i can use to copy files over etc. My xbox currently runs several emulators (mostly old stuff, like sega & nintendo emulators, but also a playstation 1 emu). I also have a program that plays DVDs without the need to buy the dvd remote, I have a media player which plays mp3s and videos (such as divx etc). it can play these off the xbox hdd, or stream over the network (Xbox has a 100 mbps connection).
This of course is just the tip of the ice berg, you can buy
cable convertors (or make your own) so you can plug USB devices into your xbox, such as keyboards and mice. Then you can install Linux and other apps.
A great site to visit for more info, and even some Mac specific tutorials is
Xbox-Scene.com