I am in possession of a slightly useless first-gen xbox; it freezes up during fast games but otherwise works perfectly. Thus, I was the perfect candidate for trying this - nothing to lose!
I shall chronicle for you how I oil-cooled my xbox with around-the-house items for a net amount of $0. It doesn't look as good as the nice way, but great for the student or just generally cheap diyer.
NOTE: yeah, the desk I'm doing this on isn't clean. Deal with it.
BIG NOTE: I'm not responsible for any damage to your xbox, spills, nuclear war, etc. It's your problem. Worked for me, but I can't guarantee you won't screw it up.
Step 1: Disassemble Your Xbox.
Step 2: Select Your Container.
The drives stay outside of the container, so don't worry about room for them. Instead, worry about getting the cords to reach them.
Remember, a tighter container means less oil to fill it with. Mine took just over a gallon to fill.
Step 3: Position Everything.
I used a bit of duct tape to attach the controller connectors and power/eject buttons to the bottom of the mobo. In hindsight, I would extend these or something; I have to turn it on with a fork.
I first tried with the power supply at the bottom of my container, but that didn't work when the power cord was added - check with the cords attached so they don't interfere.
I later decided to put the power supply next to the motherboard. I'm a bit overcautious, so I cut some rubber shelf liner into a non-conductive separator between the two.
Step 4: Put It in the Container.
Step 5: Attach the Drives.
Now, fire it up for a dry run! This is a good time to make sure it will work at all. Don't worry about the lack of a fan, it should only be on for a few minutes for testing.
Step 6: Add Oil.
If all is well, you're done! And out little to no money to boot.
Also, if you leave the buttons in the oil the green leds have a cool effect glowing.
The oil cooling didn't help with the issues my xbox was experiencing (I think it needs a hard drive), but it is a lot quieter sans fan.