Just wondering where you got your information about the Xbox running CE?
Last I heard there wasn't any further developements with CE since about February and it was still far from working decently.
You can run Win9X and even Win2000 (stripped down) thru the various Linux ports but that's definately not ideal for a car setup. XDSL will run a nLite install of 98 at decent speed but thats basically the only option right now as far as I know. And of course that is after you already have installed a modchip or softmodded your Xbox.
The Xbox would make a good media PC for the car but as far as GPS or anything like that, I don't see that happening for a long time.
If you run XBMC as your dashboard you can easily control music and video but unfortuntely you wouldnt be able to use your touchscreen and would have to hack up a remote or keyboard of some sort thru the USB ports on the Xbox, which also need modifying as they're not standard size.
All in all, your post did make some good points about the Xbox being a cheap alternative but I don't think its comparable to a full carpc setup.
Check out www.xbox-scene.com as they always keep you up to date on any new xbox appz or developements.