Out of sheer curiosity, I made a raw backup of a 120gb 360 HDD using HDD Raw Copy Tool. I then restored that dump to a 160gb Windows-formatted Toshiba hard drive, just to see if it would work in the Xbox. To my surprise, while it didn't even get recognized as an internal drive, plugging it into the Transfer Cable it showed up immediately on the 360, with all my data intact. Is there any reason putting it inside the system didn't do anything? I'm new to the whole hacking scene, so I'm genuinely curious as to why this only half worked.
The hard drive doesn't have a security sector, this basically says to the 360 "hi im an official Microsoft hard drive" The 360 can read the drive perfectly fine without a security sector, however the console is programmed to simply reject any drive without a security sector. When the drive is connected with the transfer cable the correct partitions exist, and the 360 doesn't appear to be looking to see if the drive has a security sector or not.