It is not illegal to develop for the XBox.  It is only illegal to use Microsoft's XDK to compile and release software since it requires you sign an NDA and pay a fee and open source developers can not do that.  However, with OpenXDK, you can develop, compile and release since OpenXDK was developed without reverse engineering MSXDK.  Using OpenXDK, it should be easy to port to XBox, since there is also SDLx.

The problem with the UQM Save Game Editor is that you can not modify everything.  For example, you can not modify the number of credits that you have with the Melnorme.  Looking at the source, it is no wonder since this value is stored in a bitfield within the file and may not be byte-aligned.  I am planning on starting to write a new editor that will fix this issue.