I am completely fine being banned off of live, but i do not think they have a right to disable OS features that are not live related.. They also, as far as i know, do not have the right to get some of the information they obtained from banned consoles without the consent of the user.
Ok, word on the forums and what seems like the best theory about the bans is this. When iExtreme 1.4 was updated to 1.6, a "stealth check" was incorporated that checks the game copy you put in to verify it is a stealthed disk. This seems to be the common thread with everyone who is getting their consoles banned. M$ now found a backward way to detect the firmware based on this check. The programmer is currently updating his new code to a non-stealth check version called iextreme LT. But running 1.4 (as long as you double check your discs are ok) is not likely to get you banned.
Was this during this new wave of bans or a previous one. Did any of your backups turn out to be not verified stealth?
Hm, i guess just a few more people got lucky than with the 1.6 or they're flagged and waiting to be banned anyway. Guess have to wait for the LT version and see how it performs.