The latest news on this prior to the 120 Gb version I believe, was that a cloned HDD SS on Xbox-Live would get banned (original and any clones). So unless you want to fill the 120 Gb with locally obtained material and keep it off Live, then I fail to see the buzz here. It's not like anybody is going to publically give away their SS - if they do then it'll be banned within hours...
The SS is COPYRIGHT because it contains a PNG of the Microsoft logo - MS were very clever here - copy it and you are copying a 'copyright' not just a series of 1's and 0's ...
Wouldn't it be possible to copy a blank png over it or would that corrupt the ss file? Also, would it be legal to remove that png part of the file and make par files to repair the file then give those out? Lastly, would I get banned for cloning my drive when I get my elite and playing online with the clone or is this unknown at this point?