"correct me if im wrong, doest xboxxonnect = lag?"
No more than Live does.
Most of what you here about Lag and XBConnect was related to Halo. Halo just required a huge amount of upload, as it was never optimized for internet play.
Most games these days, that are playable on XBConnect, are also playable on Live, and are optimized for such.
I personally think Live is the only way to play xbox online, but if for whatever reason I couldn't use Live, XBConnect is a very nice alternative.