I do love me lots of Halo2 on XBox live. However, I'm moving in to my new apartment and have a lot of work to do to get settled in, so it could be a while till I'm on again. Name is The Woodster. As far as cheating goes Nazi, I often times want to believe people are cheating in the way you say they are, but I don't think I've ever really seen anyone who was able to hack the Xbox in order to just give them more health or better shields or invincibility. The main ways you'll find people cheating are:
Standby- This is where they control the internet connection, and they make everybody lag out so they can't control their player and their screen freezes. Meanwhile, the cheater is going around seeing the frozen people and just killing them easy as pie. Probably the most common. It will be very obvious when someone is doing this, whenever they see someone/get in trouble, everybody will lag out, you can look at the connection status, and everyone's will be red/yellow and his will be a nice full green bar. This will happen repeatedly during a game from the same person.
Speed Hack- This is where they just zoom around the map at Mach 2.5. It's reaaallly obvious, but I haven't seen it in a while.
Headshot Hack- This is when every shot they take is an instant headshot. Don't confuse this with lucky friggin bastards who just get a few in a row on you. Headshot cheaters will get EVERY one, and INSTANTLY when they spot you. Another relatively obvious one.
Spawn Hack- This is where the cheater causes you to spawn in one spot, so your whole team spawns in the same spot. Then the cheater uses a map hack and is right next to you the second you spawn, usually he has his headshot hack on too, and he'll kill you before you even drop to the ground. It sux, just throw nades or quit.
Map Hax- This is of quite a bit debate, but you can map glitch into certain areas of the map. While I think this is fun as [censored] for dick around games, it's stupid as hell when people do it in serious ranked games, IMHO. You can't play a proper snipe map when you have 3 guys all around you, and you're distracted by the 1 guy that's on top of the map. You're never going to come out on top against something like that. But it is fun to mess around with on your free time.
So, that's my long winded description of cheating. Usually, I'll just quit if it's obvious, or if I'm on his team and he's standbying, I'll suicide or try to get myself killed by the other team, so that it negates his cheat kills. They get PRETTY upset with that one, but that's why it's just so fun. I have no tolerance for that bullish. Friggin' weak as hell and they can go back to their counterstrike if they're going to pull that crap.