The faceplate idea was mainly ruined by the fact that they covered only the front face, whilst very few gamers have their 360 set up in a perfectly fitted cabinet - if you can see where the curved wood-effect surface juts up against plain white sides it looks lame and that was the reality faced by most gamers.
It should be noted that the most successful phones for selling faceplates were actually selling full cases - think Nokia 3310 (iirc, the biggest selling phone ever) where you swapped out the front AND back.
The basic failure of the faceplates was pretty much just that, they failed to be basic. People like to have some variety in the colours of their phones, games consoles, furniture, whatever. But Microsoft never tried to offer that, never laid the groundwork by saying "so we made a £300, white games console, but for £15 you could make it black, or red, or blue". Simple is under-rated.