On Tuesday, Microsoft has released an Xbox 360 software update that overwrites the first stage bootloader of the system. Although there have been numerous software updates for Microsoft's gaming console in the past, this is the first one to overwrite the vital boot block. Any failure while updating this will break the Xbox 360 beyond repair. Statistics from other systems have shown that about one in a thousand bootloader updates goes wrong, and unless Microsoft has a novel solution to this problem, this puts tens of thousands of Xboxes at risk.
It seems that this update is being done to fix a vulnerability already known to the Free60 Project. This vulnerability has been successfully exploited to run arbitrary code, and a complete end user compatible hack has been in development for some time and is planned to be released on free60.org shortly. It will allow users to take back control of their Xboxes and run arbitrary code like homebrew applications or Linux right after turning on the console and without the need of a modchip, finally opening up the Xbox 360 to a level of hacking as the original Xbox.
Because of the dangerousness of the update and the homebrew lockout, the Free60 Project advises all Xbox 360 users to not update their systems to the latest software version. The Project website at http://free60.org/ will provide the latest information on this ongoing topic, including the final hack software.
Free60 (www.free60.org) is a project that aims to enable Xbox 360 users to run homebrew applications and operating systems like Linux on their consoles. The effort is headed by Felix Domke and Michael Steil, who have a background in dbox2, Xbox and GameCube hacking, and who have spoken at various conferences about their findings. Two years ago, Free60 released a hack that allowed arbitrary code execution using a game ("King Kong Hack") as well as an adapted version of Linux, but this possibility has been disabled by Microsoft in subsequent updates of the Xbox 360 software.
Felix and Michael have repeatedly argued that game console manufacturers should open up their platforms to Linux and homebrew, similar to what Sony has done with the PlayStation 3, before they removed the functionality of course.