Some points:
1) copying a save game is not cheating.
patching the .xbe so you have infinite lives, invulnerability, whatever, is cheating
And there's already such a pach about for halo, which makes xbconnect even lamer.
2) You cant sue, even in australia. Frankly, it's their service, and have the right to deny anyone they want.
Though, I've been hearing they're banning MAC addresses - which is just fucked. It's not like you have to replace the xbox, but your cablemodem as well?
I think the policy, and the service, suck. But it's theirs, they have the right to suck all they want.
AFAIK, there are no such restrictions on the PS2. MSFT is in no position to boss around the console market.
3) If they ban a box, they need to stop billing you immediately. (when the monthly debits kick in, of course - the ride is free for 12 months, then watch 50$ a month getting tacked onto mommas CC)
4) We all knew this would happen for at least a year. If you knew XBL wouldnt work, and modded anyways, you made your own bed, frankly.
Personally I have 2 xboxes, one modded, one not. I had planned on leaving the unmodded one for XBL and originals and whatnot. But now I worry about getting XBL, and someone accidentally taking my modded box online. If they banned the modded box - big deal. If they banned my cablemodems MAC addy, that'd suck, since I own the modem.
I guess my money will go to the BBA for PS2. Twisted Metal Black will be fun online.