THIS IS NOT REALLY MOKSI...but i dont have a username and didnt want to set one up.
i have read this entire thred and have no idea what M$ is doing but i want to throw out what my xbox is doing because i am not banned and just about everything i have done would say that i should be.
i have had the same xb for a while (v1.0) and i played live with free trials back in january and again in march (2 separate trials, 2 separate gamertags, same xb). so i had been playing on live with a completely stock xb for about 4 months (ending in april). i just recently modded my xb with a x3 and played french halo 2 for a little while. the day i got halo 2 i swapped for a seagate 80gig.
(i backed everything up from my xb, reformatted the drive using x3's awsome disk manager thing, and it allowed extra space on my F: drive, i then copied stock stuff back to the new 80 gig and put XBMC and some games on the F: partition. all the other drives are stock (i think) and i made brand new UDATA, TDATA, CACHE folders. i played halo 1, just to get something in the cache folder, and started up XBMC, just to make sure everything worked still.)
i then went and picked up halo 2. i came home set up my xbl account (from a 1 year starter kit i bought about 1 year ago and never set up) and signed on and played a couple games. i didnt play for most of the 9th until night and i played for about 3 hours, i then didnt play for almost all of the 10th when my roomate signed on (with another account he made using the 2 month trial) and he got on fine and played for about 1 hour. as far as i know i am still not banned but i will come back and let everyone know if i am.
with my setup this kinda disproves that you cant be on live b4 you mod, and also that you cant have a bigger hd. unless i just havent been banned yet. but ive been on for 3 days now and have had no problems.
just thought id share what i got.