You can do a dirty update which means you don't flash the DVD drive firmware back to stock before updating your console, or you can do a clean update where you flash the drive to stock, update the console, then re-flash the drive.
The latter is the safest way of updating, but the former isn't necessarily dangerous. I've got a few Xboxes that I exclusively dirty update and have for over a year and they're all still Live-enabled.
Also keep in mind that running a modded Xbox online is inherently unsafe. Can you get console banned?
Absolutely. Will you? Most likely not. Make sure you're burning good copies with a dvd drive running BurnerMax firmware or one that's compatible with the BurnerMax payload tool. Make sure that you're burning to HIGH QUALITY media, Verbatim DVD+R DL manufactured SPECIFICALLY in Singapore are the de-facto ones to go with, models MKM-001 and MKM-003, the latter being the better one nowadays but the former will work just fine too. Most websites won't list them by that model number nor where they're manufactured so it's kind of a crap shoot unless you're buying it from a mod shop website like xconsoles or something similar. Make sure your backups are patched with ABGX360 and your burns are
verified with Kprobe2 afterwards.
Alternatively, pick up an Xk3y and relieve yourself of almost all of that worry. I have one and love it. No worry about burn quality, media quality, specific dvd burners, the long wait to verify your rips, you just have to patch with ABGX360 and move it to the HDD. Only downside for most people is you're still gonna need a way to dump your DVD drive key from your 360 so you're gonna need not only the Xk3y, you will need an external hard drive or flash drive to go with it and also either a compatibile SATA chipset in your computer or an X360USB Pro v2 to dump the drive key.
Yeah, it gets expensive no matter how you do it.
Xk3y = $70, X360USB Pro v2 = $70, external hard drive = $70 depending on size.
50 pack of Verbatim DVDs = $55, the proper DVD drive = $25 or so though you may not get the right revision (specific revisions only work). Then you run into the issue of possibly burning coasters and needing to go through a few DVDs to get a good burn. At $1 a disk that does add up after a while. Though there may be a new LT+ firmware available over what he has flashed which you would need. If that's the case you're gonna again need a compatible SATA chipset or X360USB Pro v2.
Oddly I'd still say it's worth it if you're into 360 games. The Xk3y has the added bonus of being able to run compatible Xbox Originals without needing to patch them or anything. Burning them is a bit trickier depending on the drive in the Xbox.