I was looking into hardware modding for the XBox 360 a little while ago and it was speculated that the red ring of death was caused by several overheating issues; there were claims that by adding passive heat sinks, thermal compound to the processors and improving circulation that you could completely prevent the red rings of death. The unfortunate thing about most suggested mods (beyond the expense and risk) was that it made the XBox 360 much louder.
It is plausable that when the 360 moves to a 65nm process many of these problems will go away, and when they eventually move to a 45nm process (late 2008/early 2009) these should be eliminated.







