> I know a friend of mine can watch films that he has on his PC via his XBox by
> hooking them both up to his network hub ...
Yeah you can do that
> if you can do the same with games
> (I'm not sure if you can), then you could use the 250Gb in your PC and set aside
> some of that for the XBox.
You can't unfortunately, or nobody has figured out how. Why it's possible on the GameCube I don't know...
It IS possible to have software running in the background on an X-Box game that allows you to perform an in-game reset and get back to your favourite menu software. Perhaps it's possible to have some network loading software in the background also.
However, an X-Box binary has to be signed depending on what media it's on. Perhaps a network resource doesn't count as a media type for the X-Box, so it doesn't know how to allocate such a resource.
Certainly people are interested in making this possible.
HOWEVER, there's an ISO manager for your PC. It loads, unpacks, and sends an ISO from RAR or whatever you want on your PC to the X-Box and starts the game. You could have it send over whatever game as you need it, but it's annoying to have to wait a while every time you want to play a game.
Here it is, there are screenshots on the site so you get an idea of how it works.