Official details of X-Box
The page xbox365.com has published a secret document which is contained in the XDK (X-Box Developer Kit). Since this is a Microsoft document that was only intended for developers and relates to the software environment, you should be able to trust the statements.
Accordingly, the X-Box operating system is based on the Windows 2000 kernel but which will lack many of the functionality of the real Windows 2000. There will be no dual processor support, no support for other hardware and no actual Windows system interface. DirectX 8, which is currently under development, will be used as the graphics API. The X-Box will also have a built-in network card for xDSL or LAN. CD, DVD, CD-RW and DVD-R are not supported as media, however CD-R.