"Four years on from building the world’s first water cooled Xbox, HardOCP has acheived the same feat with the Xbox 360 and posted a complete guide to show how easily it can be done:

We had plans to water cool an Xbox 360 for over a year now. Little did we know that not only will this water cooling project be more fun than the original, but it may even be practical. Imagine that. With reports of heat related issues and a heat sink that can get almost too hot to touch after marathon gaming sessions, the Xbox 360 water cooling project now had a sense of purpose. We bought a retail Xbox 360 specifically for this project. The minute we got it back to the [H] labs we tore into it and, with a little help from the fine folks at Koolance, we have put together a water cooling solution that will handle anything the Xbox 360 can throw at it and literally knock your socks off.

..In the end, we set out to water cool an Xbox 360 simply “because we could” but it turned out to be a fantastic venture, and overall a huge benefit to the Xbox 360 cooling. I am sure we will see commercial water cooling kits pop up for the Xbox 360 sooner or later, but this build-out shown here should get you well on your way should you wish to do it yourself." [link]