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I have some buddies that work at MS (Xbox and Bungie) and both have stated you DON"T want to get caught w/ a modded box.
Not sure how they ban you (IP or System Serial#) but both are reported to MS every time you sign in. Can you get away with an oops? Maybe.. Is it worth a lifetime ban? Not for me. Make sure to keep the modded box off Live.
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Take Off Eh! 
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