The dvi on the iMac is only output. You would have to use one of the elgato products to be able to use the iMac, It would be cheaper to by a second lcd and easier then trying to peruse this.
Even if you get a conversion method to work, you will have to consider the latency or response time it causes. If you play a lot of Halo or Gears of War, you'll probably find it much harder to get kills in those games. If you play games more like Forza 2 or Bioshock (no multiplayer), then you might be able to cope with it.
That being said, you could check out EyeTV. There are a few Youtube videos of people playing their Xbox 360s on their Macs. However the picture probably won't be as good, and you have the response time issue to consider as well.
PM me if you figure anything out...I've been trying desperately to hook my 360 to my new 24" iMac.