In the early days of xbox hacking, just prior to modchips appearing, there was a hack on the interface to the DVD drive, that may just have been resurrected for the 360. Modchips appeared out of know where at the same time, making this approach a dead end, so work was never finished.
It was effectively a fake DVD drive. The cable was unplugged from the DVD drive, and plugged into a circuit board, which from memory had a Xilinx FPGA and network adapter (and supporting components). The device would pretend to be IDE DVD drive, but would send requests for data across the network to fetch chunks of data from a PC holding the large DVD image files. This would work because there was actually no protection on the actual DVD IDE bus. The IDE requests effectively just send commands like "seek to this location", "read this much data", and these were instead faked to return data from the PC across the network. All the data returned is the same as the data that would be return from a real DVD drive containing the real disk.
This type of mod cant be used to run homebrew code, but can be used to play backed up game DVDs.
A completed mod along these lines would probably have a switch to either use the real DVD drive, or the network'd fake drive.
The comment about the use of standard DVD drive makes me wonder if this was the same thing
What do you all think?