as I have already posted before, my source inside MS tells me they are doing detection based on drive performance using remote diagnostics. They have no way to properly read / detect the firmware of your drive at this point in time. There is no "big brother" style tracking of your system or anything like that, and such theories in that direction are completely wrong.
I have an Elite system with a Hitachi 78k drive which I purchased from my store brand new, factory sealed box. I got the Spring update and was playing online, then installed the most recent hacked firmware, then was able to play online using a backup copy of a game. My first burned copy of C&C 3 worked 100% fine, no problems except my lack of skills causing me to get owned. I am very glad I started using backups, as clumsy people + messy room has already lead to a very scratched/ringed backup of Guitar Hero 2. Anyways, I am still not banned, but no longer wish to take chances by playing backups while connected to Live. Many people have had the same experiences I have just detailed, which blows to shit the "fingerprint" idea some of you have been floating around.
Also, your system cannot be unbanned. My MS source tells me they mark the EEPROM just like back in the old Xbox days, and marked systems cannot connect to Live, so you'll have to RTV such systems or wait until someone figures out a way to unmark an EEPROM (if thats even possible). If you read the above information it may beg the question "what about false positives?". Indeed, if a system has a defective DVD-ROM drive which is not performing correctly it can cause that system to be banned. This is why we have seen many stories about incorrectly banned people.