Recently, Microsoft has just finished another massive cleanse of offending Xbox Live accounts. I think Microsoft has adopted one of the best policies to deal with users that artificial inflate their gamer score. The user’s gamerscore is wiped clean and their Xbox Live account is branded with the mark of a cheater. The account can still be used for online gaming and purchases though, so the money that went into the account is not wasted.
Falsifying Xbox Live achievements is surprising easy to do, but just as easy for Microsoft to detect now. There are underground sites dedicated to exchanging save file hard drive information for achievements. Each time Microsoft goes through and wipes hacked achievements it has to send shivers down that whole community. Is it worth it? They are risking being branded as a cheater just to boost their reputation.
I have friends with gamerscores in the hundreds of thousands, and I understand the pride they feel for having earned such a high rank on the leader boards.
The people that manipulate their gamerscore are risking the same thing they gain, their reputation. For better or worst there will probably always be users out there looking for an easy way to show off.