Where Microsoft goes wrong in the Xbox security system is that although it camouflages the existence of the secret boot block via a not secret boot block, and makes it very difficult and expensive to access the secret block (it's hard coded into the southbridge system ASIC, which is built in 0.13 micron), the block itself is sent in clear over the HyperTransport northbridge-southbridge bus. Thus, by monitoring and analysing this traffic (bunnie tells how, it involves a belt sander, don't ask) you get the key.
Source: The Register