I'm a little late in responding, but I'm adding in my agreement with the rest of the above posters.  You should contact Microsoft immediately and have them instruct you on how you can get this fixed.  Be stern and forceful if you have to.  Use the "I've been waiting for Fable 2 for a year and a half now and when I go to play it, your system does this...I'm going to Sony!".  That should speed them up...or at least really piss them off, but it may be worth the effort. 

luck though.  My brother had to send his system back and the experience was ok.  He was without an XBOX for about a month.