All recent softmods patch the MS BIOS in RAM, including gamesave ones.
All softmods need the drive to be locked.
There's more than one way to update a hard drive on a softmod Xbox - see
here for a synopsis, with links.
As I understand it, the current softmods that rely on hotswapping a hard drive (not a game exploit softmod) modify a copy of the bios that's stored in temporary memory after the console has started. The bios that's burned into the chip on the xbox motherboard remains intact. You would need to buy a modchip or do a TSOP flash if you wanted to modify the bios itself.
If you're running a softmod and want to upgrade your hard drive capacity, you can install EvoX as an app (if you're not running it as your dashboard), and follow the instructions found
here.