I had a similar (not COMPLETELY similar) issue with my installation. I used SlaYer's 2.6 to install a factory C: drive. My problem came from the fact that the xbox dash would not load at all (screen but no menu) with the X3 disabled. I used 2.6 again to simply format the C: drive and then copied my old original 1.0 C: image that I took when I bought the box and let XBL do its thing to upgrade.
Have had no problems since.
There MAY be a problem with some of the files on 2.6, but I'm not entirely convinced of that. All the other tools work fine. It MAY be with the installation of the Retail image.
