Earlier this week Microsoft banned one million of Xbox 360 users from the Xbox Live service for using modified firmware that enables you to run pirated copies of games. DailyTech reports today that some Xbox 360 modders are working on a solution to circumvent the ban, one fix has already arrived but it is rather complex. More details can be found over here.
The new workaround, dubbed iXtreme LT (Light Touch) aims to provide a minimum amount of security checks and aims to make the firmware as close to the stock firmware as possible to prevent detection. This fix may allow modified consoles to return to playing backup discs and other forbidden materials without Microsoft noticing.
Other members of the community are working on strategies to try to undo the changes made by Microsoft, which neuter the banned consoles, depriving them of much of their functionality (though they still will play games offline). Like Apple's attempts to brick unlocked/jailbroken iPhones, it seems only a matter of time before the creative and dedicated community comes up with a full work around.