Vortexx, I would just like to tell you how much I appreciate the work you did with this and the time you took to post your findings and resolution. I had been struggling for days with this problem and everywhere on the net it was saying it was some fingerprint software that was causing the problem. What I needed to do was to remove MC from the xbox, but it still wouldn't work until I installed the update KB960544. Now everything is back to normal again.
Thanks again !!!