So he has downloaded $3720 worth of games not including tax / shipping charges that you'd pay with most retailers, and he has only had to go through one or two Xbox 360s if he was caught and banned.
I've heard of pirates going on Live and not getting banned for some time. It seems that MS has to go through a process before banning people, like they did around the time of Halo 3 after seeing a lot of pirates go online with leaked copies.
Obviously though pirates would have to be concerned with getting banned, or even having their information turned over for some more serious punishment. I'd rather continue to enjoy going on Live without any concerns, and I really feel that Live is what the 360 is really about for most games.