As for the safety of a software controllable modchip, consider the following:
It would be trivial to force the controller chip to verify a user-set password before entering programing mode. Without any 3rd party software knowing the control sequence to send the chip, no harm could come to it.
The bigger question here is why worry about this sort of anti-mod attack? If game developers are going to get nasty, why isn't there any code being used to detect such things as a larger HD and then wipe the contents of the drive? That's a far more dastardly approach that would hit more users, not just Chameleon folk.