I looked into community games when they were still called XNA, and the format is basically a .NET executable in a container. However these will run from CON files, as when you are developing your title you must deploy a new copy to your dev unit frequently for testing. I've experimented with it, and basically if you are decent at .NET framework reverse engineering you can mod an XNA game. The tools needed to do so would be:
1. CON builder
2. XNA Membership License
3. .NET framework tools
4. Hard Drive access
Although, a lot of community games are hardly worth modding in reality. Some do have their own licensing, which makes me think piracy is something people would try. No viable exploit code is within these executables as they run in a 'sandbox' environment, with no direct access to any resources or anything of the sort on the 360.
On a side note, XEX files are built from EXE files at one point in their lifetime, and that process is often reversed when editing them. You may have seen an EXE on a dev kit launcher at one point, this is not an ordinary windows EXE as it has been compiled for the console.
hmm.... its been a year since someone said this would get leaked. Since someone said another person or themselves would figure it out. Also slipstream, that statement could be applied to anything we've ever done. -.-.
Also, PT is an idiot. He paid one of the earlier people to do it for a certain amount of money per change.