Modded Xboxes can play online?

I've long been living with the assumption that if one plays a modded xbox playing pirated games on Xbox Live, your IP address would be banned forever and ever till you die. Apparently that is not the case, according to this sort of obscure blog post that is written half in cryptic code talk, presumably based on Navajo language.

Basically it describes a piece of software called iextreme which is used to boot the xbox and allow it to play modded games. It is able to detect if anything goes awry with the boot process, which apparently would tip off MS that you're using a pirated game, and then shut down before your ip address gets reported. I mean, that's what I think it says, but my Navajo is rusty.

Of course, piracy is bad, don't do it . It hurts the poor defenseless game companies, and probably helps terrorists win or whatever. So just don't okay?