I am now a proud owner of a xbox running gentoox 3 home edition. Seems I forgot to full wipe the CD-RW I was using and that was causing the errors. Anyway, I choose XFCE over KDE because its easier to use on a Xpad and much quicker on a xbox. I configured SSH which works nicely, FTP, Samba and VNC which I havent tested out yet. Also changed the Xbox from DHCP to a static IP.
I'm quite happy with it but would like to get a usb connection for it soon, so I can plugin a keyboard as the xpad is frustrating. Now i'll be spending lots of time around the gentoox tutorial section.
You've got to love opensource software…