If he's threatening to hack you, he's almost definitely full of shit. Any idiot can (and many do) say they'll do something to mess up your account, but the number of people who can actually pull that off is practically nil. On the other hand, if you say you're going to get him banned, that's not an empty threat at all--by connecting to xbox live every player agrees to about half a dozen legally binding contracts, every single one of which explicitly forbids what you say he's been doing. Tell him to read the EULA, the Live terms of service, and whatever fine print came with the game you're playing, and see if that doesn't shut him up.
Of course, they won't get around to the banhammer for a while, so if you want relief in the short term I suggest you try thinking outside the box. Try making peace with him; see if you can find out why he's harassing you and what's actually eating at him. In other words, be nice even when he clearly doesn't deserve it. You may get surprising results.
