It totally does. I always thought the official was "XBOX"; "Xbox" looks like the way someone uninformed would write it or that it was an afterthought of a product.
Given enough time, everything becomes assimilated to look "normal". Consider the words RADAR (RAdio Detection And Ranging) and LASER (Light Amplification by Stimulated Emission of Radiation) -- what started as initialisms became normal words after people started using them regularly. It can presumably happen to newer words like "Xbox" and "Gmail" too.