If you can chip a PS2 than you should have no problem at all modding an Xbox. Piece of cake.
I'm a big fan of the Xenium ice. It's more money than a cheap mod, but for the extra features you get it's well worth it. It's very noob friendly and a breeze to set up. And why would you want to stick with the MS dash? I know it's your preference, but one of the things I like the best about a modded Xbox is all the options you have available once your up and running. Check out some of the available dashes and programs out there and you'll see what I mean.
Just call me the Xenium fanboy