This is theft plain and simple. 

Basically you are calling microsoft, saying your xbox is bad (most likely with a cd problem) and you are using a serial number that is either randomly generated or there is a generator out there.  You then and give a shipping address you will need to provide a credit card, of which you will use a prepaid one or something similar.

Microsoft replaces the xbox and is out of the money.

Here is the ramifications on this:

1) nothing happens and you make money
2) They figure out where you are, and you are arrested, selling stolen goods or even fraud
3) They know the address that it is being shipped so guess who gets a bill, when the credit card doesn't work.