First off... the 360 will have a 12x DVD-9 drive..
I'm fairly sure the "speed" on blank media is the speed that you can burn the disc at not necessarly the spead the disc can be read at after it's burned (someone correct me if I'm wrong)
As for backups being lower quality than the original... it depends...
DVD-9 is a dual layer DVD disc DVD-5 is a single layer DVD disc. Most of the time when backing up game to disc people will put it on a single layer (DVD-5) blank because they're substantially cheaper. than the dual layer (DVD-9) blanks.
with the Current gen Xbox there are only a small handful of games that actually use the 2nd layer meaning that most games can fit on DVD-5 disc without lowering the quality of the game at all. Most of the dual layer games can easily have their "fat" removed to fit on a DVD-5 also without loosing quality. By "fat" I mean removing things like video clips encoded in other languages, or demo videos etc.
Obviously if you're ripping the game yourself you have control over which way the quality is downgraded if necessary. Most current gen Xbox moders don't even use discs but instead put their games on their hard drive. In this case you can have the games take up as much or as little space as you desire and what you cut out of the game is entirely up to you.
If you're DOWNLOADING ILLEGALLY however some "groups" like to do things like down-sample the music or lowering the resolution on videos, or even cutting out all of the games video clips entirely. This is more often done to make the game smaller for downloading rather than so it can fit on a disc. I'd recommend NOT downloading games but rather ripping your own.
