Dude, Microsoft doesnt care if you are using cheats to get a special car or gun in a game. They care if you hack your Xbox to have 29305823059Gamerscore, if you hack your CoD level or Halo level, if your playing games before they are released, or basically any other hack that messes up their system. But most games have cheats that you can use. They make the cheats so that they can be found out, and people can use them. And no lol, your gamerscore is not going to say "cheater". Where did you even hear that from?
If you modify your Xbox in any detectable way Microsoft will ban your console from Xbox live. If you duplicate or modify your Microsoft Points they will ban your Gamertag and your console. If you duplicate or modify your acheivements in any way Microsoft will ban your Gamertag and console from Live.
If you use cheats built-in to in a game (most won't let you do so in multiplayer) you usually can't earn Achievements in that game while the cheats are active. Using built-in cheats in games affects nothing else whatsoever and is perfectly acceptable, if you don't mind not earning the Achievements.
Exploiting game mechanics in such a way to give yourself an unfair advantage over other players in multiplayer games is sometimes a punishable offense, usually action in this case is taken by the developer and not Microsoft directly. Exploiting in CoD for instance would only get you banned from CoD, not Live. In cases where exploiting is not monitored or the developer doesn't care, it merely lowers your respectability within the Xbox Live community. I won't even accept a game invite from anyone with less than 3 stars as a player rank since it's a pretty safe bet that they'll do something stupid or annoying.
