My 3rd XBox 360 went bad a couple of months ago, and this is the first one that died outside of warranty. I had the option of paying $100 to have Microsoft "repair" it (presumably making it work again, but leaving the flaws that caused it to slowly die in the first place), or I could spend $200 on a new XBox 360 Arcade (which replaces all the parts that are actually broken) and get a fresh 3 year warranty. I chose to buy a new unit, because when you buy a 360, that warranty is the most valuable part of the package. As I see it, I'm not buying the hardware, I'm paying for a 3 year lease on the hardware. I suppose another benefit of buying a brand new unit is that the newer 360 consoles should have less heat-related problems than the originals. So who knows, maybe this one will last a little longer.
Oddly, the only reason I bought a 360 in the first place was because the DVD drive on my original XBox went bad, and I wanted to get a new console and continue playing my original XBox games. Before that, I only bought a new console when I wanted to upgrade to the latest technology. These days, I only buy a new console to replace a broken one (like the PS2 I bought the first time I had to send my 360 in for service).