It autolaunches the updater without having the original MS Dash. It's a dual format disc, with the movie in UDF and the Xbox data in xdvdfs. Basically, the way I see it working is that it does a checksum against your current xboxdash.xbe if there is one, then if it matches, it runs the game. If it doesn't check, then it copies it's version over. I haven't checked if it will install the dash if there is no xboxdash.xbe, I'll check this out in a moment.
EDIT: Just deleted my xboxdash.xbe, and it'll reinstall it. I'm thinking this is a surefire way for fixing a failed softmod, unless the person did something completely foolish like formatting the whole HDD, or unlocking it, then locking it to a different EEPROM. Hopefully if we can get a good list going, anybody with a whacked out softmod can go down to the rental store and pick up a game, movie, etc. and try it out.
Oh, and I just remembered that the Chronicles of Riddick DVD has the Escape from Butcher Bay demo. I don't have the movie, so I can't check it, but I'm pretty sure it'll work too.