The PC: Expandability
Yes, it's quite expensive to upgrade a PC, much less build one from scratch. But it's your decision. You get to choose what you put in your machine, and where its performance truly shines. Massive hard drive space? A killer video card for blistering framerates? Or perhaps a large monitor with resolutions console gamers only dream about?
Yes, you can get an HDTV, etc., etc. However, unless you're going to include an HDTV with every Xbox, I'll stick with simplicity, and compare the average PC setup to the average Xbox setup.
It's more money, but if you use your computer for anything else, it's money well spent. Virtually any game-enhancing component of your computer enhances everything else you do with it, from reducing load times to increasing storage space to enhancing the quality of music playback. Even that souped-up video card has the side effect of hardware-decoding your DVDs, resulting in smooth playback you can watch while composing e-mail.
If you have a PC and you play games, it's an obvious choice to have a PC that's capable of games. There are exceptions, of course, but they work both ways. (You don't want the gamer in your house tying up the computer? My family doesn't want him tying up the TV.) People don't always select the "best" gaming platform; they pick the one most suitable for them. Why are there hundreds of games for PDAs, handheld organizers, graphing calculators, and more? Why did PC games from the late 80s and early 90s have Boss Keys? As long as personal computers have existed, games have been created for them. And as long as videogames exist, they'll exist on the PC platform.
Believe it or not, many gamers DON'T have to stay ahead of, or even keep up with, that infernal technological curve. Virtually any computer manufactured in the last three years is perfectly suited to playing EverQuest. No 3D acceleration required, modem-capable... and, might I add, you already possess the keyboard you'll want to use to talk to others. Not every gamer demands Quake3 in all its glory.
Which provides us with a lovely segue into...
Target Audiences
The Xbox holds great potential to capture the hearts of many a console gamer. It may even pull away many mainstream PC gamers. However, consoles have been trying for over 15 years to steal away PC gamers, and they've never fully succeeded. With the diversification of both scenes, it's clear they never will.
One group they will never fully win over will be the hardcore PC gamer (a group I proudly lay claim to.) Many of players actually ENJOY upgrading their hardware; many built their gaming machines from scratch, and refuse to have it any other way. Their games are typically simple to learn, but always hard to master. In the last five years, their favorite games are almost always multiplayer, if not multiplayer-only.
Next: Mods?...