I have seen a few people do it but never anyone that continued to use it. Most people I know test it out and then forget about it since many (like myself) tend to use social sites or my personal gallery on my site to list images.
I don't use my 360 for storing my pictures. I don't ever really think about it, honestly. My pictures either go from my digital camera to my computer or from my cell phone to my email and then to my computer. Either way, I'm using the hard drive on my computer rather than the hard drive on my 360.
I have my pictures backed up in two places, neither of which is my 360. I use my 360 sometimes via Windows Media Center to play videos, listen to music and look at pics stored on another computer.I wouldn't store my photos on my 360. If a hard drive fails, you're SOL. I'd recommend making a DVD of your photos and then store those, and then keep the originals on whatever PC you want. That way, if something happens to your computer you haven't lost all of your photos forever. I's also recommend backing them up to an external hard drive as well, but that's just me
I store all of my pictures on my computer and then back them up to my Facebook page and email account. I don't ever store pictures on my Xbox, because I don't really care to look at them on the TV. If I had a video camera, on the other hand, I might store the videos on the Xbox so that I could watch them on my TV.