A: If you never connect to Xbox Live, no. If you do connect without a stealth server, yes – your console ID is banned permanently.
Just because an Xbox 360 ISO can work doesn’t mean you should download copyrighted games illegally.
: Unmodified consoles cannot run ISO files. They require original retail discs because the console's firmware checks for specific security sectors that are not present in standard ISO copies.
Technical Analysis of Xbox 360 Game Preservation and ISO Management