And there is even an auto-installer out there, called ltools, that does everything for you. It softmods your Xbox, and is completely foolproof.
All you need to do is load up the savegame with ltools, hit install, and you're modded. No need for chip or messing around with hard drives, and you do everything you want (emus, apps, etc). No problem with Live either.
Thanks again to vagabond for giving me an insight on this.