well, my buddy has one of those:
if he presses the button just a short time, his Xbox Will boot unmodded. If he presses it longer, it'll boot modded. However, I'm not sure if this will keep you from beeing banned. However, there are alternative methods of multiplayer (XLinKAI or something), which allow you to play system-link enabled games over the internet. You may also want to look at the option to "softmod" your Xbox (that's what I did) and use such tunneling software. On www.Xbox-scene.com is quite a big forum which would cover all your questions (Softmod, Modchips, Xbox LIVE!, XLinKAI etc.).