Mandatory 360 Update Breaks Live Connection
Next time you log into Live, you will be prompted to download a mandatory system update. When you do, you will a router error and not be able to log on to Live. I'm not 100% sure if the problem is happening only to folks with wired routers, wireless routers, or direct connections.
All I know, is it happened to me, as well as a few others... Xbox 360 System Update rolling out (no new feature) - Xbox Live's Major Nelson
The worse part about it, according to the M$ dude, this update doesn't have any new features. It's only carrying elements for future feature implementation. ****ers.