IIRC, I used the one that comes with Live! 1.0, that has quite a few support files from the media directory (I was playing with XBEDump at the time - it was including quite a few including WAVs and XBGs). It's just an odd response... I presume it's supposed to return to the standard Live! xbe after not being able to connect, but since it's not there when it can't connect it spits back to the dashboard saying it isn't compatable trying to avoid a loop.
This seems to be the same one that comes with MechAssault only it's HD signed rather than DVD signed. Rather odd comparing the two files XBEDump key output, one is HDD signed only while the other is DVD signed only.
I'm slowly understanding how this lark works, it's quite intresting really. I will have a think and see what ideas I can come up with, no matter how stupid