me and my buddy were wondering if it was possible to share our Live Arcade games (maybe via hard drive?) for instance, if we unlocked some Live arcade games, could we copy it to the other person's hard drive and be able to play it on their 360? that would be awesome!

Yes, but MS can easily tell and you will get banned from live really quick.

i haven't tested it, but i'm pretty sure if you try that then it'll revert the arcade game to a trial version on the 2nd 360.

my old xbox (which i bought a couple of arcade games) broke so i went to the store they exchanged it for a new one i kept my old hard drive, now to play the arcade game i must be signed on xbox live with the game tag who bought the games. else its a trial so thats shud answer you question,

it won't work

This is not sharing games it'spiracy. If your mate want s the unlocked versions of the arcade games then he buys them... end of... and your account