well, IIRC, emulating satellite cards worked great. As long as you kept the emulator up to date it would emulate using the real card to answer challenge/responses, and patch the tiers and timezones and all that into the 'emulated' image. This was not affected by any 'checks' as it returned the correct values, using the stock hardaware.
Flashing the satellite cards would require blockers which then prevented the cards from updating to the new keys which means it would stop working.
Satellite comms is ONE-WAY! Xbox live is 2-way comms.
So looking at it from that perspective, emulation works great and is BETTER than attempting to optimize code to run on a hardware platform and inject hooks or additional data without screwing the clock cycles up..
But with that said, there were 4 types of emulation and only ONE would ever survive the wrath of EMM attempts, and would update its virtual image to comply. If the X360Key team can manage this, now that MS has shown it can reflash almost all dvd drives, it may be a huge selling point and proof of future support. Unlike that of previously abandoned projects like the WODE.
In the nfo released for the 9504 drives, it states that C4E installed a rootkit to just 'not answer' as the questions were open-ended, without an absolute response value that LT could determine.
This would make me think if he didn't answer the drive 'timed-out' on the said challenge and would likely set or send a flag to the console, which the rootkit likely prevented, and sent an 'its OK' status.
This is just my assumption, If this emuation device is correctly coded MS will not be able to detect it. Either way it seems like the X360Key can't dump the drive firmwares (which is dumb) as it should have a built-in check to dump the firmware and compare it to the 'what im gonna use' firmware to ensure MS didn't update it.
I also presume MS won't ban consoles anymore, but rather make discs stop working and reflash DVD drives to stop playing backups. They don't make much on the consoles but do on Live and DLC, which modded systems still need to pay for and is direct profit for MS. Pissing off a would-be modder by making them constantly reburn discs and reflash drives is better than forcing them to buy another console which they could then use online and their 'banned' one offline...