Swapping a new HDD into an XBox might be an arguably neater solution when its all said and done, but the Wii can work with USB hard drives to load ROMs so hard drive capacity is not really an advantage for the XBox unless you're dealing strictly with stock consoles (as the Wii is only 512MB flash vs. 8-10GB HDD on the XBox, although Wii can take SDHC cards up to 32GB for the easiest/cheapest capacity upgrade of them all, and way more than enough capacity for any emulators + ROMs the two systems can run at full speed). And when we consider the XBox uses IDE cables, you'd need an IDE/SATA adapter to mod in a new drive which can make things a little trickier than they already are, otherwise a used IDE drive is going leave you with limited capacity and reliability.
I'm a pretty big fan of the original XBox and particularly of how future proof it has been, but I think that USB2.0 and current support has given the Wii the edge, and that the XBox has been on its way out in terms of practicality. On the one hand its really cool that it can output HD resolutions whereas the Wii cannot, on the other hand neither system is really fast enough for putting out HD content anyway (other than upscaling truly retro emulators, which has pretty diminishing returns)
You have some great points, I was looking at it more price. I have the Wii and WODE and i must admit is quite nice but again you are looking at the MOD and the HD prices (softmodding would save some, but you still need a HD or a bunch of 32 meg cards). And you can still buy a IDE HD (not as cheap as one would like but 500 go for $50). I can see both as ok choices. Your mention of the USB 2 is a big downer, I have used external USB with the 360, but not to sure on the adapters for the USB on the controller ports for the original xbox.
lots of good options.