I can't find any info on this online; I figure the crowd here will know about this. I recently got the original Rocksmith game for the 360, and I've tried installing it to hard drive twice. Now, the procedure to copy the disc data to HDD works just fine, but when I go to play the game, it still reads the game disc as though I had never installed it to HDD. I don't know why, and it's the only game that does this. I have Rock Band 3 installed to HDD and it doesn't use the game disc after verifying it's in the disc tray at start up of the game, so I'm familiar with how the console behaves when loading from HDD. Also, it doesn't matter if I select the game from the main screen in the dashboard, or if I select play from the menu where I can delete/reinstall the disc to HDD.
I have only 2 guesses to explain this issue: either Rocksmith has software that prevents the 360 from allowing it from being played off the HDD which is something I never heard of any game doing, or the console requires being connected to XBL to somehow enable permission for playing this particular game from HDD. I cannot find anything online, even the official support page from the MS Xbox 360 website to verify that XBL is in any way required for this feature to work. I know that games already installed to HDD don't require XBL as I never have my 360 hooked up to the network and I see no issues loading my few other games, all installed on HDD.
I still have the older firmware, the one before the "Kinect style" version of the 360 firmware. Rocksmith required an update to be installed before it would allow me to play it, and my Dashboard interface did not change, so the game disc did not carry a copy of the latest 360 firmware on it, but it definitely installed something. Should I temporarily connect to XBL to upgrade the firmware and see if that helps?