The group, who have asked not to be named in this article, approached ZDNet Australia after repeated attempts to contact Microsoft independently failed.
The researchers say they want Microsoft to release a "signed" Linux boot loader which would allow Xbox users to run the open-source operating system on the console without installing a chip.
A signed Linux boot loader will not allow users to load pirated games, they say. However, the release of the new Xbox-exploits they claim to have developed to run Linux on the console would have the side-effect of allowing rampant piracy without the need to install a mod chip, something the hackers say they would like to avoid.
Michael Muir, of Australia's own OzXChip, a legal mod chip business, says the release of an "official" Linux boot loader would be a positive step.
"I would love to see a signed Linux boot loader even though I would essentially be out of business," he told ZDNet Australia .
Muir says the release of the claimed series of exploits, one of which is in the Xbox Dashboard utility -- factory installed on the Xbox hard drive -- could be disastrous for games companies intent on preventing piracy. If genuine, the exploits would allow anyone with even a slight technical knowledge to "re-flash" the Xbox BIOS, allowing users to pirate games. The only hardware modification necessary is a dollop of solder on the write-enable pads on the motherboard.
It's because of the "dollop of solder" being added that the group isn't eligible for the US$100,000 prize being offered to the first person to run Linux on the Xbox with no hardware modifications at all.
The technique is understood to be not original as such. Since an exploit was found in the "save game" function of 007 Agent Under Fire, it has been possible for those who were willing to make the effort and had the necessary level of technical knowledge to modify the Bios.
However the group believes that it's time to make it easier for users to take the steps necessary to run Linux on the console. Because the claimed chain of exploits is independent of any game, they could prove to become very popular. Users could download them from the Internet and load them into the Xbox through a memory card.
The range of exploits will be released within mere weeks if Microsoft doesn't respond to their requests for talks, they say.
Microsoft say the issue is with the piracy division of the company.
ZDNet Australia's Patrick Gray reported from Sydney.