So what? The HD install feature only exists to speed up load times, you still need the original disc in the drive to play. That is, if you haven't modded the box. See where they're going with this? If you modded your box you're still perfectly able to play any legitimate game discs you happen to have.
No, I don't see where you are going with that. You can continue to play pirated or legitimate games with a banned 360, but you can no longer use the HDD install feature. IMO, the HDD install is primarily used to silence the jet engine DVD drive. Not a big lose, but just something else to annoy those that got banned. Prior bannings simply kicked your console off of Live.
Neutrinos have bad breadth.