[AndyE]

This has been discussed before in these threads with "selling" tag:
http://forum.xbmc.org/tags.php?tag=selling

Again, even if our approval/consent was given, re-branded or not, since XBMC is a free software, third-paries may not actually sell GPL software, you may only sell the hardware and the distribution/packaging service that you provide, which may or may not include a support contract with your users.
http://www.gnu.org/philosophy/selling.html

Sorry, I am a bit confused by this statement. It doesn't seem to sit with the actual wording and philosophy of the GPL

My understanding of the GPL is that I am free charge what I want when redistributing the software. The only limit I have on this charge is that if I distribute only binaries I MUST give the source at no extra cost. This has nothing to do with being a third party. The freedom afforded to me by the GPL means I am free to commercially exploit the software I received under the GPL, as long as I don't limited the freedoms of those I sell it to.

Thus, I could sell my modifications to the XBMC for $100, but I would be obliged to supply the source with the modified binaries. In fact, under the GPL i am allowed to compile and sell say tonights XBMC nightly build, as long as I provide the source with my sale (assuming everything I compile is under GPL). Of course, as a long term business this makes very little sense.

So, selling XBMC along with hardware is perfectly legal under the GPL (see the millions of routers shipping with Linux) as long as I provide source. There is no fudging with "selling the packaging" or anything like that.

However, there is one point that hasn't been mentioned. If you are going to distribute XBMC on hardware or in any way for profit, you should bear in mind that many codecs provided (e.g. the most popular ones) are patent encumbered. XBMC is (i'm guessing) a not-for-profit effort. The moment you start making alot of money I wouldn't be surprised to see MPEG-LA or some or "licensing group" beating down your door asking for fees. The same reason why Fedora or Ubuntu don't ship with mp3 or mpeg4 support by default is pretty much the same reason you can't sell hardware with such support (makes me wonder about Boxee frankly)