I live in France and have a French bought XBox 360. Being British I buy my games in the UK which is substantially cheaper and the games are in English! I also run my console in English.
This works fine, except that:
- the apps that are provided on the UK XBox dashboard (things like Last.fm, Sky, etc) don't work because I'm not in the UK
- Zune doesn't work so I can't buy films, music, etc because I'm not in the UK
Things that do work:
- buying games online (I've only bought small games such as Toy Soldiers, Monkey Island - it's cheaper to buy the physical game in the UK than to buy the downloaded version)
- free updates to games
- updates to the XBox dashboard itself
- buying XBox Points in the UK
- the free XBox Live Gold membership that I had when I bought the console (I don't game enough to justify the cost of buying that)
- Facebook through XBox Live worked fine too
I've not tried:
EU rules make it clear that a product bought in one country should work in another country in the EU - if this isn't the case the EU comes down on companies like a ton of bricks. Somehow the content industry has got around this, but if you buy a physical product in a shop in one country in the EU it has to work in another country. Big companies like MS are aware of this and behave within the rules. The EU rules are why DVD/BluRay region codes are the same across Europe.
One last thing, about PAL etc, I don't know if there's such a difference as there once was - if you're using HDMI then it's the same standard everywhere. France used SECAM for its analogue broadcasts (not PAL) but games and DVDs bought in the UK worked fine in France and vice-versa (having family in both countries I've tested it both ways!)