if all else fails and you have to do a format ,take an image of your pc with Acronis and store it away from c drive then if you have any more virus probs or trojans etc just reinstall from the image takes minutes ,even installs all your progs back for you,has helped me on a few occasions.
the 3 red lights or ring of death as it is known,is a hardware problem common to all of the first released 360's
this due to overheating no matter where you put your 360 it will still do it ,it will fail to start up or crash after a few mins of play time,mine did it managed a quick fix on it worked for about 2 hours then 3 red lights again.
basically its a send back to msoft to get a refurbished one back, basically if u brought one of the first 360's don't be surprised if it suddenly gets 3 red lights
i know this is not much help only going on my own exp.
I would say bad media as well,my pioneer 111 did 13 discs on the trot all blown out saying power calibration error,got some different discs not blown one out since.