Answering my own question, as it combines a few elements from Omar's answer and James Sutherland's comment and a few others. Thanks for everyone's help!
As I said in the question, I already transferred all DRM rights to the new console in advance using the online content license transfer tool.
I concluded that re-downloading over the internet 593 items in full (over 60gb) takes absurdly long. I'm cheap, but I ain't that cheap. I went ahead and picked up the $20 Xbox Data Transfer cable from a local EBGames (they stock them).
- This pulled across ALL data on the older Xbox hard drive to the new Xbox hard drive in about an hour, though I was getting some intermittent read errors and had to retry a bit
- it also pulled across my old savegames and settings, which I wouldn't get from a straight download, so that is a nice perk
Once you've done that, as James Sutherland correctly pointed out, you STILL won't be able to play this content unless you are logged in to your Xbox Live account. To get the content playable for anyone on that Xbox -- regardless of whether they are logged into Xbox Live as you or not -- you must re-download each and every bit of your DLC.
There is something magical about this re-downlad where it "tags" the DLC that was copied from your Old Xbox as belonging to the New Xbox. Once you do this, you can play the DLC without being logged into Xbox Live. I personally confirmed this!
Now, to re-download everything is a pain in the butt, but there is some good news --
- since the content is already there, copied across via the Xbox Data Transfer Cable earlier, the downloads are very fast, basically just verification of the downloaded file and writing the "magic DLC bits" to the disk
- your Xbox Live Download History makes it fairly fast to do this; just go down the list and click the entries, but don't go too fast, as there is a maximum of 25 entries in your download queue.
The Xbox picks this queue up dynamically, and it is MUCH MUCH faster to do it through the web UI than it is with the controller. Watch near the top of the page as it will update dynamically after you click to confirm that the item was added to the queue. This takes a few seconds, so don't go too fast.
Anyway, once I've walked the list of 30 pages, everything will be "as it was" on my old Xbox. Finally. :P
When you purchase a game from XBLA, that game is licensed in 2 ways:
- To the account you purchase with it.
- To the machine that you purchase it on.
Seeing as you purchased those games on another machine, that's why it is requiring you to be online to verify those games are licensed to your account.
What you need to do is transfer content licenses to your console. It is a multi-step process, and you need to be with your new machine as you might need the Console ID, but it's fairly painless and quick. The full instructions and some videos for the license transfer are found at www.xbox.com/drm.
Best Answer
Licensing for Xbox 360 is complicated, and Microsoft changes it at their whim. Thus, before you follow any advice, I'd suggest reading the current Microsoft support document. You might have to click around to get to the one for your country/region, as the rules change per region. I'd also suggest testing any method with some cheap or free DLC before you commit large sums of money.
With that disclaimer out of the way, here's the solution.
You've got two Xbox 360s in this scenario.
Your friend visits your house where Xbox #1 is. He downloads his Xbox Live profile on the box, which adds his account to your Xbox. He plugs a USB key into the Xbox. He then buys and downloads his DLC onto the USB key using his account on your box.
Then he goes home to his box, #2. Here he can plug the USB key in, and log into his account online. The Xbox will check his account to make sure he has permission to play the game (which doesn't require as much bandwidth as downloading the game). Then he should be able to play his game on his Xbox.