I only recently set up an MSN account on my Xbox 360. The interface itself is great. I used a USB keyboard to start with and sending instant messages was surprisingly simple. But the cable for my USB keyboard was barely longer than a meter, so I decided to go for the "Chatpad".
Overall I am pleased with the product and would recommend it to anyone. The buttons are large and easy to press and the backlight offers extra user-friendliness. The headset it comes with is sturdy, and plugs directly into the back of the chatpad so you can use both simaltaneously (and for SEPERATE chats and functions). But for me there is just no overlooking the slight flaws that could have been ironed out.
Sorry to contradict anyone, but I really don't think the chatpad fits quite so neatly onto the conroller as microsoft proclaim. You cannot hold the controller properly with it on and playing games such as Gears of War is made troublesome by its bulk. Games like Oblivion, Mass Effect and PGR4 will be fine, since they don't require such quick "movement" (for want of a better word) like Gears of War or Halo 3.
Secondly, I think it's a bit of a shame that normal functions on the 360 can't be done while in chat mode, which makes the on-screen chat fairly pointless.
However, there is no denying that the Chatpad is a very useful product that is much more convenient than a USB keyboard or controller.