Initially, there were some reliability issues with the 360 that have since been fixed. I had one of the first units out, mine went bad and Microsoft replaced it with no hassle,since then I have had no poblems.
I've never bought an extended warranty on any of the game consoles we have owned (and we have most of them )and I have never had a problem. Not trying to talk you out of buying a warranty, but that's usually been my experience with well made products.

A computer once beat me at chess, but it was no match for me at kick boxing.