Its a different instruction set, going from PPC to x86 regardless of what needs to be emulated. Also the 360 was a tri-core if I remember correctly, and ensuring consistency across emulated cores is extremely tricky.
MS is emulating their 360, and doing it while allowing you to swop in and out of games on the dash. The xeon was pretty powerful, and to emulate it you would need something a lot more powerful. I don't think many people have actually stopped to think just how the hell MS managed to do what they did.
Remember they aren't rewriting the games, but wrapping the game disc in in a virtual machine. So its full software emulation of the whole 360.
That shouldn't be possible on a console that people claim is weak.