Yeah, my first 360 failed after about 4 months. At the time M$ were very good at replacing them. They arranged collection, picked it up on a Thursday and I had a new machine on the following Tuesday. But I hear they have slowed down a lot since then (I believe it's taking as much as three weeks now).
The other good factor is Xbox Live (and Xbox Live Arcade and Marketplace, where you can download games specially created for the Arcade in exchange for Microsoft Points, or demos of upcoming games for free). I know the PS3 online service is free but the lack of games at the moment is a definite factor. An Xbox Live Gold subscription is only £3.99 a month. You get a free month's trial when you get the 360.
And Phillip's right, a lot of your old Xbox games will be compatible with the 360 (not all, though, see the current list
here).
Tbh, though, once you start playing games like Oblivion, Bioshock and Halo 3, you won't be interested in your old games anymore, but it's a handy facility to have. The only Xbox games I've played on the 360 are Halo and Halo 2 in the build up to 3's release :)
I suspect that the new PS3's backward compatibility issues will be solved sooner or later, though. The PS3's built-in Blu Ray capability is a definite factor if you've got an HDtv, whereas you'd have to buy a separate HD DVD drive for the 360 to get access to high definition movies. The 360 also looks very sleek, but they never show you the rather large power brick that comes with it, which you will have to find space for. The PS3's power supply is built into the machine itself.
Pros and cons for both machines, imo, but if you're looking for a games machine
at the moment the 360 is the way to go :)