OK, OK HERES THE FILE I USE AS A FIX.
Sorry I been gone all day and couldn't post.
Its has nothing to do with live or updating files.
Just use the default.xbe thats on the SegaGT2002/Jetset Radio disk. Rename it to something like cdxfix.xbe and put it in your problem games directory. Make you INX file load the cdxfix.xbe instead of the default.xbe file. The game will then load just as a normal game would.
No update screen, no download screen, just the normal boot that you would expect to see.
It's funny that NINJADC comment about a old game made me look at SegaGT/Jetset disk again. Even though his file had nothing to do with it.