well I'm not banned (yet.. I didnt connected to live yet) but I really need to know and I think others will also.

try to do reset to system settings by donig:

My Xbox -> System Settings -> Console Settings -> system info

then push:

LT
RT
X
Y
LB
RB
Y
up
left
down

push the dpad and not with the stick.

it could be that the combination of the last three is different so try any 3 combinations with the arrows.

for me it worked, but I didnt get banned so I didnt click yes.

thats just going to clear the cache on the harddrive. that isn't going to get a system unbanned, or remove any dashboard updates. that will have the same effect as removing the harddrive from the system.