Game Girl Advance reports on Microsoft's XNA Game Studio Express development platform for the Xbox 360, and an Ars Technica article has more details from a programmer's view. Basically you can develop on an XP desktop box and deploy over an Xbox 360 subscription network. The fees aren't trivial but aren't outrageous. Low cost enough that some enterprising computer clubs or informal youth media groups could cook up something interesting.
This could also be a vehicle for some interesting research based, software development platforms. The Chicago Python User Group already kicked around the idea of using some form of Python for building apps.