Several things could have happened here:
1) the game has been patched to wave 3 (I ventured onto the torrent sites and was shocked at what I saw going on). You can check the disc with abgx360 and it will tell you if you.
The game however looks for what is the current dashboard update and will tell you it needs to be updated before it can play (if you have patched to wave 3 this update will not be included), removing your hard drive probably just makes the game fall back to a "compatibility mode" of sorts which will allow basic play.
Two options here:
a) If it is not homebrew capable or you just do not care for it then update by hand: http://www.xbox.com/en-US/support/systemus...stemupdates.htm
b) If by some miracle you are still on a 7 series kernel then I would suggest sorting homebrew out and using the rebooter app (development has slowed but a homebrew capable 360 is set to be a wonderful thing- region free and beyond). This is in the territory of full blown homebrew though and somewhat complex.
2) You have a 1.61 on a samsung or benq drive or a hitachi drive with 1.51 (the only modern hacked firmwares that can boot wave4 and seemingly beyond unaided) and have been blocking the update by yourself. Let it happen if you want.