Microsoft really needs to add a "No Asshole Rule [http://www.amazon.co.uk/Asshole-Rule-Civilised-Workplace-Surviving/dp/0749954035/ref=sr_1_1?ie=UTF8&qid=1302118785&sr=8-1]" (I use the word strictly in the sense that Stanford professors do).
"By signing up to xBox live you agree not to be an asshole to other xBox live users. Microsoft reserve the rights to discontinue without refund, services provided, to assholes."
Why does it need to be any more complicated than that? Imagine if they implemented it, and I was choosing between buying a 360 or a PS3:
"Hmm, the PS3 sure is tempting, but on the other hand, Microsoft ban assholes. I might not like Microsoft, but I like assholes even less."