Yep. It needs to be modded. Just got mine done - it works with the mod chip enabled, but refuses to boot with the chip disabled. Got to take it back at the weekend to get it checked.
Anyway, it's definitely worth doing, mostly for the emulators (full-speed Mega Drive, SNES, N64, Amiga, GBA, Atari ST, PSX, etc), but also for the XBox Media Centre.