> As long as the used/borrowed copy still plays fine without any fees when the disc is in the tray, I don't see any difference to the console status quo.

In order for someone play a disc that they have purchased on someone else's console, the owner will need to sign into their Xbox LIVE account in order to play the game. Even if the owner leaves the disk with his or her buddy, they will not be able to play it without either a) signing in with the owner's XBL account or b) paying full retail price for the title.