the first place to look is here:
"UK copyright, design and patents act of 1988"
the older law on copyright which was wrote in 1988, when copying games wasnt mainstream. this law has been amended several times in the last 20 years as technology has advanced.
basically it is illegal
to circumvent a copyright protection system (like CSS on DVD's), but the question is, when exactly is the copyright system bypassed on an xbox 360 console? (google bunnies comments on the recent legal case in the US for the best opinion on this subject)
is it when the drive is flashed or chip installed?
or is it when the disc is ripped and burnt to a disc?
the flashing of the drive in itself does not allow you to play backups, unless the discs are ripped and prepared in a certain way. so in that case, if you were simply flashing the drives/installing chips then you were not technically doing anything wrong in that train of thought, right?
if you were selling games too then you are indeed f***ed lolIMHO
it should be
100% legal to back up your own property
but the problem lies in that modding the console only leaves moral choice as to whether a person backs up their own property, or hit torrents and leech every game on the supermarket shelves for free.
pretty soon i think we will have our own version of DMCA, and modchips will become illegal, as well as all flashing etc.
i felt some pity for you until i read that you run several sites offering these services, i mean, in all honesty, if you were whoring your services all over the internet, did you not expect this sort of $#!t to land at your door? why are you so surprised and annoyed?
i mean think of it this way, if you had a friend who robbed houses, and you drive him around whilst he was out robbing, would you be as guilty of the thefts as he is, even though all you did was give your friend a lift?
think about it. you and I know the only reason 99% of people get the consoles flashed is for cheap games. the police know it. and they will not care about the rights of a small minority of people wo do it legitimately stop them from going after the big fish who make serious money out of copyright infringement, like you.
for your original question on the law and any changes,
in 2008 Neil Stanley Higgs of Speedwell Road, Speedwell, Bristol was found guilty at Bristol Crown Court of 26 offences under a 2003 amendment to the 1988 Copyright, Designs and Patents Act for supply and installation of xbox 1 modchips.
he lost his first trial and was found guilty by all jury members.
he then appealed it and got off, and this started the misguided idea that it was ok in the eyes of the law to mod consoles. It isnt trust me.
then in late 2009 another case went to trial and losthttp://www.theregister.co.uk/2009/11/17/modchip_ruling/http://www.bailii.org/ew/cases/EWCA/Crim/2009/2293.html
read the links above and then think about whether or not they have a case, i think they do.
anyone caught doing it at home for their own use will get a slap on the wrist and a caution at best.
you were obviously making a tidy profit off it, hence why someone took notice.
expect a big fine and possibly a sentence depending on any other convictions you may have, and how many consoles and fw files they find on your computer.