This is more a link so I remember to try this.  But we run XMBC on our old xbox at home and use it to play movies, music, everything over the network off all of our computers.  Lifehacker has put together a  pretty thorough article on how to run it off a thumb drive, and I definitely want to try it out:

http://lifehacker.com/395212/run-xbox-media-center-from-a-usb-drive