As I was following this thread, I wrote out the guide for myself to make it a little clearer to me and my thick skull. Maybe others might find it useful, so here go's
Install a game on the xbox as you would have before hacking it.
Now browse your Xbox HDD with XeXLoader and find that game, it will be under Content\000000000000000\Title_ID_of_Installed_Game\00004000\
It should be at the bottom of the list, but you can also use
http://360.kingla.com/ to find the Title ID of games for future reference.
Create a folder called 00007000 so that you now have 00004000 and 00007000 in the same folder.
Copy the contents of 00004000 to 00007000
Delete 00004000
Copy the single file (it's called a pirs container and will be named what looks like a random bunch of letters/numbers) from the root of 00007000 to your USB stick and take it to your PC
There is a folder of the same name, but as you will see, we don't need to use the files it contains.
On your PC, create a temp folder containing blank .txt files renamed to Data0000 Data0001... (without the .txt extension)
apcarr has kindly provided a folder with these files already created (up to Data0050) for download
http://www.sendspace.com/file/3klgf7This stops you having to copy those files over from the 360. I placed the temp folder in the Le Fluffie folder.
If a game ever needs more than 50 of these files, (you can see how many are needed in the folder mentioned above) just create the rest. (copy and paste a bunch of them and rename them Data0051 Data0052...
Download and run Le Fluffie on your PC (Le Fluffie SEX.2 App.zip)
LINKUse Le Fluffie to open the file on your USB stick
When it asks for a data directory, just point it to the temp folder that contains those Data0000 files
In the drop down box, select GameOnDemand
Click Dev LIVE
Then click fix package (Do not tick hash).
Now copy the file back to your xbox replacing the old one.
The game will now be available from the dash under Xbox 360 Games, will have the achievements listed, and won't ask for disc.
Big thanks to DJ Shepherd, dstruktiv, apcarr and everybody involved in this awesomeness (IMG: