Xbox uses a modified version of windows ... could this not be as modified of a version of Linux and the correct hardware security would lock out most forms of piracy. The OS is not the problem it is how open the platform is to modification. PCs have to be open or they are nothing but consoles this console by no means has to be so "piracy friendly."

"the use of Linux and open architecture of the console will undoubtedly lead to rampant piracy on the console. If any aspect of the underlying OS can be changed, what's to stop hackers from circumventing security measures intended to lockout copies of games obtained through illicit means?"

How could you tell that? You can already play AAA games on common open Linux enviroment vithout piracy issues (eg. Steam). Also, Linux could be heavily customized, so you can make custom kernel with special security functions for secure gaming and keeping open system enviroment.
Generally this could be smaller problem than on Windows.

But I am most afraid of that price tag....