[*Ahem*, I assume the copied music CD is just a compilation CD of tracks you already have on other legit CDs you own.]
You got a modification message? Sounds like you may have been banned
You can't have been banned for using a copied audio cd - unless you had the mod chip turned on when online (& you don't need to use a mod chip to play CDRs).
Are you sure that you have not been online with the modchip turned on?
It is also best not to have the modchip turned on when using the M$ dashboard. (have you ever left the mod on when using the M$ dash in any way? Have you got "auto sign-in" turned off in the dash?)
I can't see M$ giving any help....they'll surely just tell you you shouldn't have modded the console.
If you have been banned, then a new EEPROM is the only solution (& then make sure that one doesn't get banned!
)