My advice to make it more watchable is this: Get a capture card.
However if you really have to record it from the screen with a camera as a cheap stop gap (which may take some extra work), zoom into the screen so that it fills the entire capture area and make sure there are no glints reflecting off the screen.
When editing, make sure you sort out contrast/brightness issues. Also, hook up your sound output from your X-box to your PC and record the audio from that instead using
one of these cables (you may also need an extension cord depending on how far away your PC is to your TV) and something like
audio city to capture the audio - Then align the sound with your video during editing (
Windows Live Movie Maker is a bit pants but it's free with Windows 7 if you have it, and does what it says on the tin).