SMcc - You do realize new 360's do not fail, right? Since late 07, they've been very reliable. Fans of other systems unfortunately like to bring up the past (just like the 4 year lifespan of the Xbox equating to the fact that the next Xbox is supposed to release this year).
Here's the thing with this article: Most other companies have the same protocol. Awhile ago, one of my credit cards I used for Ebay expired, and Ebay couldn't get their money quick enough. What'd they do? Ban my high-volume account of 4 years (that I worked for to have a great 99% feedback rating), despite the fact I paid the outstanding bills!
So it's not just MS. There are plenty of horror stories out there for every subscription service. The weakness with MS and XBL is that most users are savy enough to know that if they don't get their way, they can post on a blog or gaming forum and complain till something changes. With close to 20 million XBL users, this stuff is bound to happen.
Back from the dead, I'm afraid.