We all knew MS had the ability to scan for modded X-Boxes, but I (foolishly) didn't think they would actually do it.
But surely if you alter your serial number, then get banned, some poor guy out there that legitimately has that serial number can't play anymore. The bans are lifetime, which seems pretty drastic.
I agree, there will always be cheaters. Unfortunately, consoles have a younger market than PCs, so I would expect even more cheating on a console online service.
Course, I have an unmodded X-Box, so I'm really not worried. And buying a second box (imported or modded) to play foreign games is actually an alternative, given the price.
In the end, if someone wants to cheat bad enough, you really can't stop them. It's fine to try, but not to the point where you start messing up the legitimate players.