Xbox – How to stay connected to xbox live without other users (including friends) knowing that I’m online

Here's a link on Networking with the Xbox 360, from xbox.com.

Here are a couple of links from instructables.com that seem to cover exactly what you're trying to do.

And here's a video of the same thing.

The DRM for games on demand is the same as for all digital content available on Xbox LIVE:

• Any GamerTag can use the content on the console where the content was purchased
• Your GamerTag can use the content on any console, as long as that console is connected to Xbox LIVE.

See Xbox 360 Digital Rights Management for more information.