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So, an update to my issue, just in case anyone else has it to some other varying degree because it's not always as bad as I got it.
The issue is apparently the update causing problems with how the Xbox detects pirated games. In some cases it causes everything to come up as "Unrecognized", but more common is it reading newer games like Skyrim as "Unrecognized". This info comes from a few support people, though the majority still claim the drive is broken and needs repair, as well as XNA developers. Because apparently Microsoft is communicating with them better than those with the actual problem.
So now I have to wait until whenever they feel like rolling out another update. Yay.
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