I gotten this error many times and in trying to fix it, I noticed the best solution is to try another eeprom. This problem seems to happen most often when trying to go back to using a stock hard drive, after getting banned while using a larger hard drive.
I am not sure but I was wondering if it has anything to do with the fact that some XBOX's have an 8gb hard drive and others have a 10gb hard drive, as I always get this error code when loading up an eeprom from another XBOX with an 8gb hard drive when using an stock 10gb hard drive, but switching the eeprom contents from another matching XBOX (same drive type/size), I don't get the error code.
I also noticed on some machines I found the best way to get rid of the error code if you can't switch eeproms, is to unlock the drive, format it on a PC, then reformat on a XBOX and then relock the drive, and then test the XBOX live connection and if no error codes use RECOVERY to restore your account.
This last fact, makes me think part of the error code problem may be stored on the drive itself and is in part of the 5mb "drive config area" which is where the partition table and your XBOX live account info is stored.