I corrected it how I was guessing that you wanted it...
you had missing closing </List> tags in there.
I think what you wanted is this:
<Menu>
<Item Action="LaunchDVD">Launch DVD</Item>
<List Text="Games" Sort="On" Auto="On">
<Path>E:\Games</Path>
<Path>F:\Games</Path>
<Path>G:\Games</Path>
<Path>E:\HDDLoader</Path>
<Path>F:\HDDLoader</Path>
</List>
<List Text="Emulators" Sort="On" Auto="On">
<Path>E:\Emulators</Path>
<Path>F:\Emulators</Path>
</List>
<List Text="Applications" Sort="On" Auto="On">
<Path>E:\Apps</Path>
<Path>F:\Apps</Path>
<List Text="Dashboards" Sort="On" Auto="On">
<Path>E:\Apps\Dashes</Path>
<Path>F:\Apps\Dashes</Path>
</List>
<List Text="Media Players" Sort="On" Auto="On">
<Path>E:\Apps\Media</Path>
<Path>F:\Apps\Media</Path>
</List>
<List Text="Other Apps" Sort="On" Auto="On">
<Path>E:\Apps\Other Apps</Path>
<Path>F:\Apps\Other Apps</Path>
</List>
</List>
<List Text="System" Sort="Off" Auto="On">
<Item Action="Settings">Settings</Item>
<List Text="Misc" Sort="Off" Auto="On">
<Item Action="FTPStop">Stop FTP</Item>
<Item Action="FTPStart">Start FTP</Item>
<Item Action="FTPReset">Reset FTP</Item>
<Item Action="NETReset">Restart Network</Item>
<Item Action="TrayClose">Close DVD Tray</Item>
<Item Action="TrayOpen">Open DVD Tray</Item>
<Item Action="CopyDVD">Copy Game Disk</Item>
</List>
<List Text="Format Menu" Sort="Off" Auto="On" Password="Xbox">
<Item Action="Format" Arg1="F">Format F Drive</Item>
<Item Action="Format" Arg1="G">Format G Drive</Item>
<Item Action="Format" Arg1="X">Format X Drive</Item>
<Item Action="Format" Arg1="Y">Format Y Drive</Item>
<Item Action="Format" Arg1="Z">Format Z Drive</Item>
</List>
<Item Action="Skins">Skins</Item>
</List>
<Item Action="FileManager">File Explorer</Item>
<Item Action="C:\xboxdash.xbe">MS Dashboard</Item>
<Item Action="Restart">Reboot</Item>
<Item Action="Shutdown">Shutdown</Item>
</Menu>
I didn't know what you were trying to do in this section, but it's not correct..
so I whacked it out.
<List Text="Copy Disk" Sort="On" Auto="On">
<Path>E:\Apps\Copy Disk</Path>
<Path>F:\Apps\Copy Disk</Path>
