somehow i think that microsoft will have a different idea...like they licence the use of the machine for only purposes that they allow. thats why they don't like people trying to run linux on it.
doesnt modchip circumvent the built in copy protection/region locking mechanisms of xbox? isnt that against Digital Millennium Copyright Act?
then again i assume modchipped machines are very small percentage of total machines sold. maybe it is tolerated by microsoft.
the ability to modchip xbox does also create some demand - i mean i wouldn't own an xbox if i couldn't modchip it

just means you can't go on xbox live.