They're *ALL* taking themselves way to damn seriously.
The 'scene' is teensy, tiny, insignificant. A few thousand modded boxes amongst a sea of millions sold is nothing.
I can guarantee you that MS brass spends more time thinking of ways to stop employees from stealing pens than it does thinking of ways to make xbox harder to crack.
Did they send a team of lawyers do beat Bunnie down after he found a way in? Nah. They let him go ahead and publish his findings. After all, modding didn't exactly hurt the PSX.
v1.1 was a simple contingency plan. Cycle the codes. Make the investors see you're doing something. Is it unhackable? Nah, just a little harder.. But they key is *IT DIDNT COST THEM SHIT*. A complete redesign from the ground up would be stupid on their part - they'd be spending a dollar to save a nickel.
The 'secret trick' (which refers to the buffer overflow/reboot exploit, IIRC) has been well known and documented online for a while. I remember reading it before linux became a reality, as an alternate boot method on the xbox-linux site. I guess its gone now. Which is lame from the very notion of what Open Source is supposed to mean. No stupid 'secrets' like this.
Anyways, it's not a case of MS being too stupid to close the hole. Its a case of it not being nearly cost-effective enough for them to do so.
The only way it becomes cost-effective for them to do so is if modding becomes so easy and ubiquitous that anyone can do it, and the percentage of modded consoles starts being significant. And ALL THE MODCHIP MAKERS are moving in that direction. Then there are all of these websites and forums helping people see how easy it is to mod their xbox. They ain't helping either.
You want to keep your geek secrets tight to your chest? Give us the 30 wire mods back. If anything wakes MS and gets 'em to lock the box down tight, it's going to be the "no-soldering install in 2 minutes works with xbox live" mods.
Though even that's unlikely. Wave 2 is going to be in the software, IMO. Look forward to shitty half-working cracks like there is in the PC warez scene. DVD-9 makes for huge crosslinked dummy files, tons of reroutes, lots of media checks... A real mess. And much cheaper than paying a team of engineers to redesign the system and still keep it 100% compatible with the old one.