Ddaddy,
I have been watching this thread with interest. I must say well done on your find.
I made a loopback plug using an RJ45 and a couiple of wires (I am on IT engineer, so I have these things liying around), and BAM!! Xbox 1.2 that was causing trobles out of the loop.
Now to some Ideas about why it works...
I believe that the primary concept is time delay for the fonts hack to load. This may well be correct.
The delay will be caused by the Xbox seeing it has a valid network connection on the network port, and therefore it will try and communicate with the server (or modem or router) to obtain a valid IP address and various other details. Because it only has a loopback cable fitted obviously this will not happen. However it will try for a few seconds before failing.
My train of thought on your discovery is:
The Xbox boots, realises the clock is wrong, sees it has a valid network connection (loopback cable) and boots anyway because it thinks it can get the time / date from the network.
Maybe you are correct, maybe I am, however the main poit is IT WORKS!
Excellent find
Regards,
Psi