According to reports hitting various hacker groups overnight, the Xbox 360 has been hacked and will now boot games cut from ISO format to DVD-R. The claims, unsubstantiated at time of press, assert that the 360 middleware buckled under pressure from hackers, a mere four months after the Microsoft machine launched.
You can grab video feeds of the alleged hack
here. And as you peruse the videos, think about this for a moment. The footage could well be hoax. Simply because, the AV cables shown running into the TV hosting Project Gotham Racing 3 aren't necessarily the source of the picture on the screen. There could well be an Xbox 360 running the game out of sight, plugged into the back of the set and for this reason we would doubt the hackers' claims of Microsoft pwnage.
A quote from one watcher in the hacker community reads:
I have figured out how it was done in the video. (the video of the guy playing the PGR3 backup) here's the instructions, I am currently playing Full Auto (Backed up).
It's a modified firmware of the Xbox 360 DVD-ROM drive. As you (should) know, all Xbox 360 executables (XEX files) are signed by Microsoft (with a private key only MS has). This means that if you try to change anything to the XEX file, the signature will be wrong and the file will not boot.
Now ... to protect from booting an exact 1:1 copy of a game from a DVD-+R, microsoft gave each XEX file a 'mediaflag'. This mediaflag tells the Xbox 360 from which media (cd-r, dvd-r, dvd+r, dvd-rw, hdd, dvdxbox, dvdxbox360, ...). Changing this mediaflag in XEX is not an option as it'll break the signature (see above), so ... what's done in this firmware hack is breaking the detection of the disc.
So can it be that easy? Can the DVD drive's middleware be manipulated to allow any disc to be booted by the console. We'll find out in the coming days. Keep it locked.