No you don't.
You need to take the xbox drive out of the box, install it in a PC and overwrite the Firmware on the drive. I also recommend buying a samsung SH somethingamorather DVD drive so you can flash that with xbox360 drive firmware, install it in your PC and use it to rip xbox360 games without having to put your Xbox 360 Drive in the PC each time you want to rip a game.
I also think it's a good idea to get the connector kit as your xbox drives uses a wierd power supply connection. Otherwise you have to have your xbox powering the drive, and the PC with the data connection while your modding it.
I'm sure there's people in the US who will do the mod for you if you don't want to pull the box apart yourself, or don't trust your technical ability.
Total, it'll cost you A Hundred bucks max, plus the price of Dual Layer DVD's, which here I can get for $5nz, so that's not exactly expensive.
Even if what I said above sounds like too much hard work, hit up
www.xbox-scene.com and read some of the tutorials, browse the forums etc.
I haven't had any problems with xbox live, but we never know what MS might do in the future.