This has just happend to my launch day system. £ red lights and nothing I tried fixed it.
Called Game on the off chance they had one in to replace and they didn`t - well they had cores but said they would only exchange premium for premium. Also said I could wait for them to get some in ETA unknown or call MS.
Couldn`t be bothered with the hassle with Game, so called MS last Weds, UPS left a box next door today (pity they were out when I got home!).
A tip I got from a few - call MS later on in the day UK time (around 6pm) some I know had a tough time with the UK call centre, however if you call later you might get the US call centre (esp after "normal" UK working hours, ie 9-5). The US were spot on with me, a short call on an 0800 number and I was on the route to a replacement.
Lot less hassle than arguing with Game.....