Anything wrong with using those Xbox Live codes from auctions?

It is a good question though, if these guys dont use key-gens, how else would they be getting all these codes? How could this be legit?
 
Why do you need Live to use your 360 as a media device?
Annoyingly, the 360 needs to check with Live before it starts playback of some video files, for no reason at all! Its fantastically stupid because the codec is obviously already on the system.
 
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