If you hog all the bandwidth by downloading stuff to the PC at the max speed possible by your line, then of course he'll have problems connecting to xbox live. You haven't said though if this is just occasional downloading of files, or if you're downloading large files at constant speeds (torrents for example).
If you are downloading at full whack, you'll have to manually limit the down speed so his xbox isn't having to fight for bandwidth. This is easy to do with any torrent software, but if it's other files (say just stuff downloaded directly off a website) then I'm not sure how you'd control that. I believe there are free programmes out there that can measure bandwidth, but I'm not sure about controlling it.
Also, upload is another thing you have to watch out for. If you upload at the absolute max. your line can handle, the download speed will drop way down. It's worth limiting your upload to something just below your limit if you're downloading uploading simultaneously. Again this may relate more to torrenting.
P.S - Some people would probably do a lot worse than moan if you messed with their xbox live...