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The title of this thread is both right and wrong, depending on the case.
This might get a little long, but bare with me...
Its like this. If you mod your Xbox and upgrade your hard drive BEFORE ever signing up on Live, you will not be banned from Live, provided you disable your modchip. Its called the marriage concept which I'll explain better in a second. When you sign up on Live, the serial number from your hard drive is recorded with your Live account. I have the X3, which has a disable switch. I play Halo 2 all the time on Live because I own the game. You CANNOT play ANY game on Live from your hard drive because that would mean the chip would have to be enabled. You MUST own the retail game in order to play any game on Live.
Here is how people are getting banned. People that mod their Xbox AFTER they have already signed up for Live, have gotten banned when playing Halo 2, even if their chips were disabled. This is where the marriage concept comes in. This concept is that when you sign up for live, the serial number of your harddrive marries your Live account. They become one. So when someone has already signed up on Live, then mods their Xbox and puts in a new hard drive with a new serial number, when they sign back into Live, there is a mismatch, and they are banned.
You can learn everything you need to know over at the forums on teamxecuter.com
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