I think this is an interesting topic and thought I would add my 2 cents. First off I am not sure if MS can 'see' your saved games on your e drive... this would be one way of checkin for french software. also in my opinion, if you play live and go on kai and play the french software, your asking for it.
In my personal opinion, (which may be really extreme but not impossible) M$ is freakin pissed off about the french software situation. It is possible they set up a small team of people dedicated solely to banning 'hackers' from live. This can include hacked software of any kind, re-used eproms, french software, large hard drives... basically anything of this nature... even taking gamer tags from sites like this and scrutinizing these accounts.
this may seem a little crazy, but its not impossible is it?
ps. not banned yet, but assuming its coming soon for reason im not going to say (and im removing my name from sig).