The original Xbox makes a great platform for playing emulators. Since it's already got four controllers and is hooked up to a TV, mine is a far superior thing to play old classic console games like Sonic 2 or Streets of Rage on than a computer. There are several emulators available for modded original Xbox systems that can be used along with XBMC4XBOX.
These emulators for modded original Xbox systems aren't dependent on XBMC to run, but since most people who have a modded Xbox are using it for XBMC anyway it makes sense to add them to the programs launcher section of XBMC.
You could create shortcuts to specific games by following the instructions here.
But a better option is the ROM Collection Browser addon, which is available for computers as well as modded Xbox systems running recent XBMC4XBOX releases.
Most game console emulators have features like save games and screenshots, which weren't available on the original systems. Being able to save in classic games makes them a lot easier, and you no longer have to leave your system paused and running for hours while you're off doing something else.
The Playstation 1 emulator for modded Xboxes (Xboxen? What is the plural of Xbox?) that I use is called PCSxbox and it runs a little slowly in the one game I played on it, Sled Storm. The music also didn't playback correctly, but this is a common issue with Sled Storm and PSX emulators. The same issue exists on the Android Playstation emulator. I wrote more about Android game console emulators here.
Emulators for the older consoles like the SNES and Genesis work great, and it's a lot of fun to be able to play Sonic the Hedgehog 2 on a big screen TV scaled to a high definition resolution. That was the first game I played on my very first console and it's a great nostalgic trip to play it again. NeoGenesis is the name of the Genesis/Mega Drive emulator I'm using on my chipped Xbox and it works perfectly. I've got a bunch of the games my parents bought for me when I was a kid loaded on my Xbox and it's fun to play them again and remember the good old days.
While you can easily mod an original Xbox controller to work with a computer and play emulators that way, if you've got a modded Xbox running XBMC4XBOX it makes a lot of sense to add emulators to it so you can play multiplayer games on the TV. It's still worth doing the controller mod so you can use your controller on both a PC and the Xbox though. Of course, if you have a 360 controller you can just plug that straight in to a computer and be up and running.
Finding emulators for a modded Xbox can be a little tricky though since many are compiled with the XDK and apparently are not legal to distribute. That's not really a problem for people who know how to find things on the net, just use your favorite search engine. There is at least one actively seeded torrent at the time of this writing that contains a ton of different emulators for modded Xbox users. Roms to go along with those emulators also aren't too hard to find. That's all I'll say about that.
Of course, if you can actually manage to find a legit compilation of old console games that were ported to the Xbox, that might be a good option too.
For running emulators on the computer versions of XBMC check out this Lifehacker article. The process of finding emulators and roms and adding them in is pretty much the same.
I also like this other Lifehacker XBMC primer.
And I'm off to go play a newly modded install of Oblivion.