While the 360 was in design, the PC market consisted of Athlon and P4. There was no C2D, no Athlon64. PPC was still is use by the Apple Mac and the vector units were a mile ahead of anything else; important for gaming. The RISC design was also amenable to the simplified, multi-threaded, high-clock design which was also suited to gaming, considering that there was no other multi-core on die CPU available to consumers at the time. The high clockrate was also an advantage for the 360's innovative GDDR3 architecture.
In hindsight for us as players, staying x86 would have been preferable for BC. But MS was burned badly by Intel, and AMD possibly didn't have the facilities to spec an Athlon for them at the time. But the 360's CPU is no slouch, don't forget it can emulate the xbox P3 CPU at full-speed.
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