Got it replaced today. Very nearly got a PS3, but just didn't want to spend another £115 making the swap.
Question though - are the 360 controllers that come with the console itself actually tied to that console? Its just that one of the controllers does not want to connect now. I purchased a second controller and may have given that one back.
I just can't believe that a controller would be tied to a specific console, but if thats not the case, then there is something else wrong with this box. If there is something wrong with this one, then I am definitely getting a PS3 tomorrow.