Not only can you use keyboard/mouse but you can ssh into it. So you don't even need them. Just ssh using your current computer, and use them headless. BAM. No needs for a T.V. or any peripherals
The biggest cluster I setup was my 2.6Ghz, my 1.2Ghz and my 3 733Mhz Xboxes, was a fun project, I think I did it as a final presentation in my Networking class. Even if you don't plan on using them for huge processes, you can always have one for webserver, mailserver, etc. etc. Skies pretty much the limit. And well, hiding an xbox in the closet as a server is a lot easier than a big arse tower. Not to mention that you can upgrade your HDD's in the xbox too. (Very tricky though, if you mod yours and want to know how I can help. Has to be lockable... bbiiggg pain in the arse
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