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More specifically, I think one of the reasons why MS has generally tolerated the mod scene is that the percentage of modders is relatively small. The fact that users were forced to physically open up their Xboxes to mod them has kept the numbers small, but with easily packaged software exploits such as the new Complex Loader 1.0, I think a lot of casual users might start jumping in.
Also, think about how the no-solder options from the Matrix chip led to so many clueless users flooding the scene without researching answers on their own. Now imagine that number multiplied many times over because now users who want to run modded software don't have to go through the effort of learning to physically install a modchip.
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