But aren't there already existing methods to dump the firmware from your 360's DVD drive? So a device like this for the Xbox 360 would theoretically be possible?
Matrix Team are prototyping a similar device caled the WiiZii that allows you to connect a SATA HDD. Source
Yes, this thing is legitimate -- it is a full-fledged replacement for the drive, not some Datel hack. No, I don't have one, although I think it would actually be useful for development -- but I am not a big fan of people behind it (who are unrelated to the GC drive emulator project).