' Many big 'general news' sites wrote about the new Xbox LIVE bans, with a lot of false and unconfirmed information, but Associated Press released an article with some reactions from Microsoft you may want to see '

With Halo 2 expected to entice a new batch of users to the Xbox Live online gaming community, Microsoft says it got tougher with people suspected of making unauthorized modifications to their Xboxes.

Cameron Ferroni, general manager of the Xbox software platform, says Microsoft is not interested in suing individual users. But the company does want to banish scofflaws from its online service, Xbox Live.

Ferroni declined to go into specifics on how the company can check Xbox Live users' machines for suspected modifications. He said Microsoft has no way of checking whether players who don't use Xbox Live have modified their machines.
Neil Smith, an intellectual property lawyer with Howard Rice in San Francisco, said there's little legal risk in modifying a game system for relatively benign personal use, such as making players invulnerable.

But it is important to Microsoft to prevent such cheating on Xbox Live, where multiple players can take part in games. Ferroni said the goal is to make sure there's a level playing field.
Microsoft says it has focused its legal efforts on those it believes are manufacturing pirated games or mass-producing Xbox modifications.

McNealy - an analyst with American Technology Research - thinks Microsoft is right to go after those who are playing pirated games, but he thinks Microsoft might be flattered by some of the other homemade tweaks.
"To modify it to the umpteenth degree is simply a byproduct of the geek culture of the hardcore gamer," McNealy said. "It should be good news for Microsoft that there's that much demand (for Xbox) that people want to spend so much time figuring that stuff out."

News-Source: http://www.forbes.com