There's more to it than "1.2GHz". We don't know much about the Shiva architecture. According to the article it's "ARM9-like" because it's based on Feroceon and XScale. How many ARM9 encoders or transcoders have you heard of?
Also consider that although the Xbox can decode most everything, it's a closed system, which I'm sure added a little to the performance of XBMC code. I doubt a similar 733MHz Celeron desktop would be as capable even if it had more than 64MB of RAM.
Aside from serving video, the system may not be able to saturate its gigabit ethernet either. I read that spec as Marvell saying the CPU and SoC can push more than 100mbits, so they used gbit ethernet. Maybe its throughput is limited to, say, 20MBytes/s.
This is a sweet little toy, especially for its price, but it's not going to compare to most x86 mini-computers.