You guys do understand the technical differences between the firmware mod and a mod chip, right? The original Xbox' chips and softmods allowed you to run unsigned code by modifying the bios/kernel/dash/whatever. Of course they'd ban for that sort of thing. Unsigned code = cheats and instability.
You can't run unsigned code on the Xbox 360 (yet). A backup disc has the exact same code/data as a retail disc, it's just on different media with a few slight differences. Still the same signed, legit code.
Microsoft made minimal effort to fix the hardware security holes in the original Xboxes, but if you take a look at what they've done to combat the firmware modding for the 360, you'll see that it's all changes to the hardware itself. To me this means they either don't have the hardware support to 100% verify a modified firmware, OR that they just don't care after considering how many different brands/firmwares there are out there already.
I bet they'd rather make it a lot more difficult to mod the drives than to worry about what is (currently) nothing but a very small amount of piracy. Piracy isn't so bad compared to cheating and that kind of bullshit on Live.