Both, kinda. You can't play any dvd's on a non-modded xbox without the playback kit. But the xbox was always able to read DVD backups.
The exploit involves
-007:AUF
-A hacked 007 gamesave
-Any xbox that is not the newest v1.6
v1.6's cannot down grade dashboards, and the exploits have been fixed. It is still possible to load the gamesave, but you have to do so everytime you want to play a backup.
There are many different gamesaves. You need one that boots evox, and installs a program named "pheonix bios loader". Xbins has it, that is all I can say.
You need a way to transfer the hacked save to your xbox. For this, you either need an Action Replay to send from "PC->AR->XB HDD", or know sombody with a chip already so you can get it from theres.
I suggest you read up on it here:
http://forums.xbox-scene.com/index.php?showforum=45
You cannot go on xbox live with the dashboard exploit. I suggest you use the one where you click the "xbox live" tab to launch the exploit, otherwise, when your clock resets, it may render your xbox into a paperweight (by booting over and over endlessly untill you install a modchip to fix it)