So you can't take it and put it into a pc, but you can install linux on the 360?
It's really semantical. What is a "PC" and how do you put something in it?
You could take a standard tower case, customize the mounting holes with tools, and mount all the 360's parts in there. Is it then a PC? You can even buy (very specific) parts for your 360-in-a-tower's-body and it'll be compatible (Microsoft used a select number of general PC parts that can be bought and is well documented). Is it a PC now?
The modern definition of a PC is generally agreed to be a general-purpose computer. a 360 is a computer, but due to the 360 OS, it isn't general purpose. By putting linux on there, it becomes general purpose and is now a PC.
So, to answer your question, you CAN take it and put it in a PC (depending on your definition of a PC) and you can install Linux on a 360 (or at least you could in the past, updates constantly change things). What you cannot do, though, is take the 360's CPU and use it with Windows or most commonly available motherboards.
Edit: Well... maybe... just maybe... it'd be possible to use qemu to emulate (not virtualize, qemu is an emulator, hence why this is is hypothetically possible) x86 on the Xenon processor running Linux, and then install Windows on there, and thus have Windows on it...