If you want my $.02, M$ is playing this very very smart. As bertiedugger stated (I would have quoted but for some reason when I hit the button the page keeps timing out, anyways...), people whose 360s have hacked firmware but keep their boxes isolated, that is not connected to the net whatsoever, will not be subject to a software update from big Bill. In turn, a direct hardware solution was the obvious route to take, i.e. the "new black glue," new programming so that existing software to implement hacked firmware could not be utilized, and so forth. As far as I am concerned, the next logical step taken by M$ would be to implement a software update (to prevent firmware hacks on older DVD drives) that is automatically initiated via playing a popular game that almost all 360 enthusiests would endulge in, say Gears of War or Halo 3 perhaps.
One thing is for sure though, the war between Redmond and the underground has most certainly begun!