Eventually what will happen is someone will come up with a way to remove the Mod Flash, or override the lockout program for XBox live and then you can use it again. Under a different Login name, of course.
Their are a few things which may fix it and override the XBox Ban.
Depending on what their using to determine which machines are modded, I read it was a sniffer program in a recent XBox Live update, which "tagged" the machine.
It is possible that the Banned machines are simply banned based on the IP Address of your XBox live connection. If you did get banned, see if you can use a 'Proxy" server and then login... Might work! You may also be able to just go into the machine and replace the BIOS chip or Flash it. If it has a Motherboard it probably has a BIOS chip or remove your CMOS Battery and then replace it and restart the machine.
You may also be able to locate the "sniffer" file from the Update Files. If thats possible. The OS on the Xbox may also have a restore point. Just restore back before the Update, remove the Mod chip or files, and then go back onto XBox Live. Dont forget Xbox is a computer, with Network capabilities. You can get into the system OS.
Im sure all that would void the piss out of the Machine Warranty but, its already voided and banned to begin with.
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