XQEMU emulates standard USB OHCI controller, it's possible to connect virtual USB keyboard and mouse to it.
Noticeable usbohci_new spam in the debug log:
Sometimes it leads to infinite "Installing devices...", but sometimes it does reach setup window. Once you try to move mouse cursor, or press a key on keyboard, it works just once, and afterwards input doesn't work anymore.
Full debug log attached.
The problem was also reproduced on real Xbox 1.3, but without debug log spam, tracked in CORE-16726.