Thanks to this great thread, another 360 has been revived! Got the ring of death last sunday. 2 days ago, i was about to win a replacement 360 on ebay, but was sniped at the last second. A few minutes later, i found this thread and decided to give it a run. I have decided to compile the info I used as a means of giving back and helping others. NONE of this info originated from me. 90% of it is a compilation of tips from this board, and the rest are basic tips I learned when combatting PC overheating.
First.....what is happening? Well, the gpu and cpu are soldered to the motherboard. The solder connections are becoming compromised over time, due to the board overheating and flexing, eventually leading to lockups, and then to the red light 'general hardware' errors.
Why is this happening? There are a few factors that combine to cause the 'perfect storm' of heat/flexing/lifting (more like 'perfect storm of shit') that results in the 360s failure. Specifically in regards to GPU failure. They are as follows:
1) The heatsinks are attached via an 'x bracket' that is a flawed design. The gist of it is that it applies pressure that causes the motherboard to warp over time.
2) The solder used is a lead free solder which is apt to provide lower quality connections than lead based solder. I am NOT a soldering expert, but this is what I gathered from the threads I saw on here.
3) The design of the 360 has the GPU fitted with a much smaller heatsink and is further crowded by the dvd drive. The cpu has much more 'breathing room'
4) The fan shroud design (open vs. partitioned) leaves the majority of the air pulled thru the cpu heatsink, even though the GPU would theoretically need more airflow based on it's smaller heatsink.
5) The motherboard is only connected to the chassis at the corners. Standoffs in the middle would help prevent flexion.
6) There is a thermal sensor that will increase fan speed when a certain temp is reached. However, the sensor is on the CPU (this MAY be wrong.....i've seen conflicting reports....however, in my own observations, there is not a sensor on the gpu). Since the gpu's heatsink needs more attention, it would have been much better to have the sensors on both chips. Or, just the GPU. What I've seen is the gpu's heatsink roasting, and the cpu's just warm to the touch.
What about people saying updates caused their issue? OK. I thought this was crap at first, but a few days before my failure, I installed the 1080p update (i don't get online often, and haven't even played in awhile....hence the delay). My theory is that the latest updates did some graphical driver updates that tax the GPU even more (pushing it harder and harder for the latest games), which excacerbates the problem of the GPU overheating. Coincidence....maybe, maybe not. Interesting theory, though.
So, theres the what and why. Now, for the fix. Here are the supplies I used. The best option is to take your gpu heatsink and one of it's loose hex bolts into the store for reference. Your store may not have the 'exact' hardware I used. If you have your sink with you, you can accurately identify a replacement:
Qty 8: 5m bolts 10mm long.
(5m is a metric measurement. In my US Home Depot, the majority of their stock is standard measurement. They have a special section of drawers where they have the metric hardware)
Qty ??: 5m fiber washers.
(the guideline here is you need the same width of washers as the hex 'standoff' of the original heatsink bolts. The ones i found needed 2 washers to replicate that thickness. So, I used 2 washers on the top, and one on the bottom. If you cannot get all fiber washers, you could probably get away with using metal. However, you should make sure the washers don't extend over any of the traces on the board if they are metal.
Arctic Silver thermal paste
Variety pack of high grit sandpaper (200 thru 1200 grit). You may need to go to an autobody hardware store to find the higher grit. I found mine at Harbor Freight for 2 bucks.
Here's the steps I took. My 360 was showing signs of definite GPU problems (checkerboard lockups, and eventually the ring of death):
1) Disassemeled 360 and removed xbracket from gpu heatsink. Goal here was to remove the source of the board flexing.
2) With the top off the 360 and the the fans disconnected and fan shroud off, i prepared to run an overheat. Since the xbracket was off, I simply set the heatsink on top of the GPU (providing minimal functionality). I turned on the xbox and waited until the 3 red lights switched to 2 (indicating overheat). At this point, I waited about 2 more minutes to give the heat a chance to do whatever it does. I did not wait until auto shutdown.
3) I verified that the xbox would restart without giving the 3 red lights. It did. If it did not, I would have done step 2 again, and let it run longer and longer until the 3 red lights disappeared.
4) I cleaned the heatsink and gpu chips of the stock thermal compound. For the cpu chips, use a toothpick to get the gook from around the chips. For the gpu chips, I used a bit of rubbing alcohol on a qtip and circular motions to get the residue off the chips. When the main gpu chip is clean, it should have a mirrorlike appearance.
5) Lapping the heatsink: I purchased a variety pack of sandpaper from the hardware store. It had from 200 grit all the way to 1200 grit. I got a piece of glass (a mirror would work ok). I removed the hex bolts from the GPU sink, so it was flat. I laid the lowest grit sandpaper faceup on the glass, and without putting much pressure, I ran the heatsink in circular motions. After a couple of minites on that grit, I switched the paper to the next highest grit. I repeated this process until i was at the 1200 grit. At this point, I ran the sink under tapwater, and then rubbing alcohol to remove any dust/oil.
6) Applied a paperthin layer of arctic silver to the heatsink and gpu chips.
7) put the m5 bolts thru each heatsink hole on the motherboard. For each bolt, I had one washer below the board, and 2 washers above the motherboard. My washers were of width that 2 washers = the hex 'standoff' width of the original heatsink posts. The goal was to replicate that original width on the top. Then, I placed the heatsink over the bolts and tightened them a bit with my fingers. At this point, I went around and gradually tightened each bolt with a socket in turn as you would a set of lugnuts on a tire. My rule was to tighten them until they began to offer resistance, and then give them about 1/4 extra turn each. Do NOT overtighten. It is better to undertighten than to overtighten. You can always go tighter if necessary.

At this point I started the 360 and gave it a successful testrun. The reason I did this now was so that I had a point of reference as to when it was 'working'. If I did the cpu heatsink before giving it a testrun and ran into problems, I would have the question of 'is it the cpu or the gpu that is acting up?'.
9) Repeat steps 4 - 7 for the CPU heatsink.
10) Give another test run.
11) I wanted to do some fan/case modifications to help cooling. I did everything on this great tutorial (thanks RBJTech!)
http://rbjtech.bulldoghome.com/pages/rbjtech_bulldoghome_com/Xbox360.htm
I have confidence that this procedure will keep my 360 going for a long while. If it starts flaking out on me, my next step will be to buy a heatgun and do a proper reflow. If that does not fix it, I plan on buying a new 360, and performing these mods on it before I even run it for any length of time. I believe that will truly keep this damage from even happening.