Unfortunately that's not true. In addition to not being able to play legitimately bought DLC, As mentioned above they alter the 360 in a number of ways.
The Windows Media Server integration is disabled (although video library streaming is not) The local data on the hard drive is forceably corrupted, including the gamer profile and your hard drive installed games. Loading games on the hard drive is disabled completely. So, that essentially makes the large hard drive useless on that 360.
You can move that hard drive to another 360.. however, the catch is once you remove it from the banned one, it further neuters that 360 as a media player since all the DRM is on the hard drive and it can no longer play any USB loaded xvids, etc. So essentially that particular hard drive becomes a dongle tethered to your banned 360 if you want to play any media on it.
About the only thing you can do with it is play games, but once you save a game on it.. it's there to stay and can never leave
