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That is a pretty funny prank and a great way to get back at him for peeking at the gift. However, since we only know what we see in this video, I would hope that they would have ended the prank soon after because that kid was devastated or at least give him a hint that they were joking.

Still, if he still gets the 360 and gets an apology from the family, that is one darn funny video. If not, then that's really mean. Again, I hope he gets his 360 because I've read stories of parents punishing their kid for doing something bad by selling the brand new console on the spot (I think there was a story about one when the 360 launched).
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My parents did something sort of like that with my sister. She's going on a school trip so they baited her by saying that they have to spend all of their money to pay for the trip. She took the bait so much in that she was so depressed and angry leading up to Christmas day when she finally got her gifts.

I think the ultimate prank like that I've done is when I got a HUGE box and a small gift for my friend and threw lots of junk in the box (even smaller boxes) that my friend had to rummage around for a while just trying to find it.

Good times.