I have checked and read numerous forums to find the answer to this. But no definitive answer. I have a banned 360 flashed with 1.5 fw and up until now i have been using the wave patcher to patch all of my games to wave 3 and they all have worked flawlessly. If i update to the new kinect dash will that dash render my backups useless? I obviously have no worry about online play as i am banned already. I would also like to purchase the kinect and still use it on this same console. But i don't want to risk being "locked out" by the new dash of using all of my old backups. Can someone offer some legit knowledge on this situation?
The new AP2.5 protection works in conjunction with the new dashboard. If you play an AP2.5 protected backup (Fable 3 is the only known AP2.5 game at the moment, but other new games may be affected), your console will be flagged and banned, unless it uses a DVD drive that isn't capable of handling the AP2.5 challenge/response tests.
If you don't play any AP2.5 games, you can update and play online as long as your backups are all properly stealthed, but you're never 100% safe from a ban, as always.
Personally, I would stay on the NXE dash and stay offline until LT+ is released. There's no ETA for that, but it will probably take a while because even though they've already cracked the new AP2.5 protection, they'll have to test it thoroughly.
So, the point of this is: you can still play back up games with the new update, but no one knows...
but just wait.
EDIT: Sometimes M$ will use the new games and put them some Force update system... That's what I heard...