My co-worker had an older Xbox 360. He purchased it in November 2005. It worked perfectly.....until he bought Bully. He popped it in and before the game would even load to the title screen, the Xbox 360 froze, crashed and displayed the Red Ring of Death (where the Green Ring would normally be). None of his other games would work. The unit wouldn't even boot. Microsoft now needs to repair/replace his unit. He will be without his Xbox 360 for 3 weeks.
He contacted Rockstar games about this. They claimed there is no possible way a game could do that to his unit. Even though the freezing and crashing issues are widely known. They blamed Microsoft. I think Rockstar is passing the buck.
I feel bad for him. I hope the same problems are not repeated when GTA 4 is released. The Rockstar QA team needs to improve their test cases. They need to test their games on new and old Xboxs.