I had a friend do mine whos abit of a wizz with 360's! If you wanna give it a go, do it, but make sure u know exactly what your doing before hand..
Its 100% worth doing and will save you a dick load on games
burning dvd's is really easy, i use CDclone and burn at 2.4x, you just need dvd+DL's
Make sure you get decent disc's else they'll end up being unreadable..
If your 360 dvd drive is a liteon, you'll need to purchase a key extractor hardware kit (cost me about £25 i think) older drives are much easier...
As for xbox live, aslong as you run the latest xtreme software, and dont play games before there release date on live, you should be fine (ive been playing sf4 on a secondary account with my network cable unplugged)
ive been reading up on it now, seems really easy to do so going to give it a go this week.
apparently u can stealth patch the games so wont get banned straight away.
if it goes ttis up and it gets banned a new xbox is only £130 now, or i just dont use live anymore. i have a ps3 also if i want to play any console games online.