At this point, it seems unlikely that we'll be seeing an Xbox Portable any time soon. Even so, we can go ahead and pursue this pipedream, just for the sake our own imagination and curiosity. What form factor would be the most appropriate for an Xbox Portable?
Some combination of the Nintendo DS and the Sony PSP would probably be the best, I think. You can map the standard Xbox controller on the bottom half, and then have a large widescreen display that flips up in a clamshell kind of way. In the center of the controller portion, you could have a touch-sensitive section that adjusts to the current situation, like the Motorola E8. I don't think a touchscreen is needed, nor is a full QWERTY keyboard. This is a gaming machine, not a messenger.
Not that it matters. I don't think Microsoft is going to grace us with an Xbox 360 Portable. Prove me wrong, Redmond. Prove me wrong.