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1.) do i have to turn on my 360 when im flashing my dvd drive?
The 360 IS NOT INVOLVED. The power comes from your computers PSU (into the ODD adaptor that comes with the kit and on the other end of that it plugs in the drive) and the data (sata cable) goes into the x360usb and then into a USB port.
The 360 is unrelated, the dvd drive is completely removed from it during the whole process and stays like that until its all done.
If you looked at the diagram in the "rigging it up" part of the guide this would be obvious. Read it ALL!
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2.) can i use NERO instead of Clonecd to burn my backups?
I'd reccommend against Nero. Althout Ive never tried it it isnt as reliable for 360 games.
Again, if you read the guide there is a free solution - Xbox Backup Creator. Download link and how to use it is in the guide.
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3.) will the X360 USB adapter work on windows VISTA?
Hmmmmm. Now this one I am not sure about. The hardware, the x360usb itself should work fine. That isnt the problem, its the software itself - the flasher that may be incompatable. Search the forums for information on this.
You could always dual-boot XP and Vista.
Adam