... is to do one thing, and one thing only.
Allow offline play if the disc is in the console.
The DRM system is designed to check up on you if you're playing directly from the HDD, with no disc inserted - that's the entire point of them using the once-a-day checkup, otherwise you could loan a game to a friend, let them install it, then they could play it for free forever, unless they wanted to take it online. So how can you improve this system?
As I said, allow for gamers to play offline, providing the disc is in the console. The disc would act as a local authentication and proof that the game is legitimate to the console. While this is not perfect for games bought and downloaded online, they could be bundled with a further local authentication which allows offline play.
These two, highly simple and extremely efficient methods would get the majority of gamers upset by the DRM back on board. And it wouldn't cost Microsoft a penny.
Thoughts? I'm trying to contact MS and get their thoughts on this idea too, and will report back if there are any responses (unlikely, but worth a shot).
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Of course they won't actually do this. It makes to much sense for them to do that...