Xbox Live Silver you can only download content, no multi-player gaming. Gold you can do everything. Both accounts have friends list, messaging between friends, etc...
As far as I know no satellite internet provider requires the use of the phone lines for upload. For sure, Hughesnet, my provider. Older systems did, but any more it is satellite for uploads and downloads.
Yes, it works for Xbox live. I have Hughesnet (Direcway) home plan (768Kbps Down and 128Kbps up) and I played Burnout revenge when I had my Xbox Live Gold membership (1 free month) I raced against others and didn't see any issues, except for latency, which didn't hurt me too bad most of the time--sometimes it was worse than others.
Latency on satellite is bad--right now at 12 midnight, pinging
www.google.com returns in 685, 715, 715, and 744ms, an average of 717ms. Try that with Dial-up or DSL and you'll see how much faster the communication is. The reason for this, well think about it, it goes from Earth to satellite, back to Earth, goes out and searches net, back to satellite, and finally back to Earth (me). This takes more time than from your house via fiber-optic to server that searches net, and back to you via fiber-optic.
Xbox Live offers a few things for free, but most cost points (you can buy points at Wal-Mart, etc.) nothing real expensive, but they still cost $. Mostly demo versions of games, some themes/gamer pictures, movie/tv show previews, and game trailers are free. Most everything else cost points. Movies and stuff are the most expensive that I've seen, though you can buy some games through Live.
This is were the problem with satellite comes. Huhgesnet and Wildblue have what is called "Fair Access Policy" or FAP--other ones I am sure have some type of FAP, I think I saw a new one that don't have a FAP being talked about on here the other day look in broadband forum--which for hughesnet is 175MB within "a short time period" that if you download, you get cut back to at or below dial up speeds, and it can take up to 12 hours to get your full speed back, this is for their most basic plain, Professional and buisness accounts have higher FAP limit, but not enough IMO). I'd say the best you could hope for is 1GB when it comes to a movie, so satellite just isn't good for large downloads, because of the FAP.
Beyond this issue, as far as downloading files that are small enough not to cause you to go over FAP limit. Or if you do download big file, say 175MB or so, you might want to not use your internet account for anything except browsing for several hours so that you don't get FAP'd. If you do, it isn't a big deal, you just won't have the speed that you've paid for. At least not for several hours.
