Various gaming sites are reporting that the official April Xbox 360 system update re-enables hard drive functionality on banned Xbox 360 consoles. Previously Microsoft attacked pirates by releasing a system update that kicked consoles off Xbox LIVE and corrupted data-- such as achievements, savegames, and user profiles-- stored on the HDD.
But now it seems that the Redmond-based company managed to unlock the banned drives while implementing support for USB-based flash storage. Currently Microsoft has not released an official statement, however the new fix allows Xbox 360 owners-- those who were locked out of their HDD-- the ability to install games again. The side-effect is that the previous update still applies, corrupting data based on achievements, savegames, and more.
One other thing: there's a certain trick to bring that console HDD back to life. The steps don't look illegal by any means, however a flash drive or a CD/DVD burner will be needed to get things somewhat back to normal. Check out the simple step-by-step instructions by heading here.