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1. He's not asking about copied or downloaded games, he's talking about backups.
2. It's not ILLEGAL to mod your xbox.
Its not illegal if i own the original copy.
Secondly, there will always be the risk you may get banned. There is absolutely no guarantee that you won't get the ban at some point in the future - it could be tomorrow, next week, next year - no nobody knows.
If you play "backups" online you are significantly increasing the risk of getting banned. Here's how to decrease your changes of getting banned:
1. Don't play "backups" online - only offline, when you are signed out of XBL (unplug wireless adapter/ethernet cable).
2. Keep your Xbox drive up to date with the latest iXtreme firmware.
2.1. Don't pay someone to do it 'cos you'll just have to keep going back to them whenever a new updates comes up. Fork out the money for the kit (CK3, or whatever) and do it yourself. You'll be saving money in the long run.
LT as far as anyone knows it not detectable on live if used correctly
but most people dont know what splitvid or ssv2 is and think its ban proof
If Live is so important to you then buy a second xbox purely for playing backups and keep your untouched one for Live gaming.
Same applies as if it was a gold membership.