Well, here's the deal. The XBox warranty is different in significant ways compared to a computer warranty. Most computer warranties cover the computer even if you opened it, installed new software, etc. However, the XBox warranty has a section that specifically states that if you modify the xbox, the the warranty is null and void. But, that's to be expected. The question is if MS would refuse warranty service to a person with a softmodded xbox still under warranty.
Secondly, you could use XBoxLinux to zero out a hard drive using the 'dd' command. But, the data would still be recoverable at that point, you'd need a sequence of zero'ing and writing random data to every sector of the hard drive, and repeat several times before the possibility of data recovery is a pipe dream.
